Independence by Design™

You are the shareholder, the board, and the CEO, and somehow every meeting is still a mess. Same people. Same table. Nobody knows which hat is talking. Jim Brown has spent thirty years on that problem. I wanted to get specific with him about how an owner separates those jobs without pretending to be perfect at all of them. His line: the board answers the what and the why, and they have to release the how to management. Even when the same three owners run the company, you still run a board meeting, take coffee, then a management meeting with a different chair. Not for status. For clarity. The seats exist whether you admit them or not. When you skip that split, you override the CEO you hired, people stop telling the truth, and everyone pretends they are perfect. Imperfection is not incompetence. It is how a real leadership team covers each other's weak spots. Figure out who you are in which seat, or the company stays stuck on you.

Chapters:

[00:00] The Imperfect CEO & Imperfect Board

[06:23] From Hard Lessons to Better Leadership

[11:22] Creating Meaningful Work & Engaged People

[15:27] Purpose, Planning & the Leader’s Responsibility

[17:06] Shareholder Goals, the Board & the CEO

[20:20] Three Seats: Ownership, Board & Management

[23:10] What & Why vs. How: The Board’s Role

[24:23] Different Hats, Different Roles & Clarity

[27:59] The Board as a Partner, Not an Interrogator

[30:49] The Imperfect Leader: Strengths, Weaknesses & Trust

[34:51] Insecurity, Authenticity & the Pressure to Be Perfect

[40:13] Leading People Through Changing Expectations

[47:43] Leadership Is About People, Management Is About Stuff

[51:57] Vulnerability, Board Accountability & Supporting the Decision

"And here's some gold for you. The board has to answer the what and why questions. And they must release to management the how questions." — Jim Brown

"No one in the world needed to know who was our board chair, because it wasn't about status, it was about clarity." — Jim Brown

"Well, you just told the CEO that you hired that you don't trust them, actually." — Jim Brown

"These roles exist whether we admit it or not." — Ryan Tansom

"It would be so much better if we would just admit our imperfection. Which is not incompetence." — Jim Brown

"Leadership is about people. It's not about stuff. Management is about stuff, leadership is about people." — Jim Brown

Jim Brown is the founder of OrgHealth (The Org Health Team), based near Toronto. He has spent more than thirty years helping boards and CEOs clarify their roles and build healthier organizations. His books are The Imperfect CEO (released May 2026) and the 20th anniversary edition of The Imperfect Board Member, with a publication date of September 29, 2026.

Your 2027 budget needs a price, a hiring plan and a cash number, even when the economic headlines disagree. Kim and I sat down with economist Alan Beaulieu to work through what owners can do with that uncertainty. We start with the difference between rising sales and real growth, then connect bond-market trends to pricing, margins and the payback on borrowed money. I push Alan on the risks I see in government debt, China and the monetary system. He keeps bringing us back to the business and the people inside it. We talk about AI, the industries your customers depend on, and why a profitable market today may not be the one you want tomorrow. The work is turning those possibilities into a plan before you need it, with a team willing to listen and change. For me, that means a three-statement model connecting operating decisions to your time, cash flow and wealth. If revenue falls 10%, what happens to cash, and what will you do?

Chapters:

[00:00] Introduction: Navigating an Uncertain Economy

[03:02] The Bond Market Is the Signal to Watch

[07:39] Inflation, Pricing & Protecting Your Margins

[09:25] Debt, ROI & Preparing for a Downturn

[10:07] The Nonlinear Economy & Planning for Risk

[19:07] China, Debt & Global Economic Pressure

[24:19] Deflation, Productivity & the Business Cycle

[31:30] AI, Productivity & the Human Cost

[35:14] Protecting Your People While Adopting AI

[38:11] Customer Exposure, Industries & Cash Flow Risk

[41:06] Knowing When to Pivot or Sell the Business

[48:26] Building a Playbook for Multiple Economic Scenarios

[55:54] Listen to Your Team: Leadership Through Uncertainty

[01:05:36] Ownership Goals, Time, Cash Flow & Wealth

"Have the plan on the shelf, open it up and go. This is what we're doing. Step one. It's already been decided." — Alan Beaulieu

"Because you're doing that planning when you're not in crisis mode." — Ryan Tansom

"A leader who does not listen is not a good leader, in my opinion." — Alan Beaulieu

"you can just see the impact of every one of your ideas on your time, cash flow and wealth." — Ryan Tansom

Alan Beaulieu is an economist who spent decades helping business leaders apply economic forecasts at ITR Economics. He returns to the show with his daughter, Kim Clark, founder of V2A Marketing and Ryan's partner at Independence by Design. Alan and Kim also host The GrowthPlaybook, connecting economic trends to the decisions business owners make. This conversation continues their earlier discussions with Ryan about economic context, budgeting and planning for change.

Great people doing great work for great clients create great impact. That is Camille Nicita Higley's whole model in one sentence, and the financials are the output. You have a version of it on a wall somewhere. You have never been able to point to it on the P&L, so every quarter it loses to the numbers. She spent thirty years building a company on that sentence, sold it, ran the global firm that bought it, and three years after we first talked she is more certain of it than ever. I told her I thought I could prove it with an income statement. Strip any company down and it is people doing work for customers. The people doing the work are your cost of goods. Everything else is overhead. So great people is not the soft stuff you get to after the quarter closes. It is the line your customer is paying for. The rest of the conversation follows from that. Growing the business means growing the people. Handing them a task is not handing them the judgment. And the reason owners never quite do it, in her words, is that your identity is tied to being needed. Figure out who you are before you sell, because most owners leave the business long before it leaves them.

Top 10 Takeaways

Chapters:

[00:00] From Selling the Business to Finding a New Chapter

[08:23] The Flywheel: People, Work, Clients & Impact

[14:24] Great People Create Great Work and Sustainable Growth

[18:11 ] Leading Indicators of Organizational Health

[24:06] People Are the Real Cost of Goods

[26:30] Great People Are What Customers Pay For

[30:02] Investing in People, Purpose & Long-Term Health

[38:32] The Everyday Moments That Make a Business

[44:05] Delegating Tasks vs. Transferring Judgment

[51:13] Growing the Business Means Growing the People

[56:25] How to Actually Transfer Judgment

[01:01:23] Letting People Fly & Learning From Failure

[01:03:32] Putting the Right People in the Right Roles

[01:27:34] Finding Your Identity Beyond the Business

"Great people doing great work for great clients create great impact. Financials then become the outcome of that." (@00:11:08) — Camille Nicita Higley

"Great people is actually what the customers pay for. If they don't have great people, your product or service sucks." (@00:30:11) — Ryan Tansom

"You're delegating a task versus teaching how to transfer judgment." (@00:48:28) — Camille Nicita Higley

"My identity was so tied to just being needed, and that's probably the thing I had the most withdrawal from after selling the business." (@00:49:04) — Camille Nicita Higley

"Growing a business means you're growing people. If people are still doing the same thing today that they were doing two years ago, you're probably not growing." (@00:55:40) — Camille Nicita Higley

"For a lot of business owners, they leave the business far before the business actually leaves them." (@01:33:22) — Camille Nicita Higley

Camille Nicita Higley is a leadership advisor, former CEO, and the author of Open When: Wisdom for the Leadership Moments That Matter. She was one of the founding members of Gongos, Inc., a Michigan market research firm she joined at 21 straight out of college, and she rose from there to CEO and owner. She led its sale to Human8 and later served as global CEO of the combined organization. Today she mentors founders and executives, serves on corporate and nonprofit boards, and speaks on leadership. She was first on the show in 2023, on Ep. 358, right after the sale. This is the three-year catch-up. She lives in Southeast Michigan, has three adult children, and started running eight years ago, which comes up more than once.

There is somebody at your company you want to put in a seat, and the last time you promoted someone on promise it went sideways: the team lost respect for them first and for you second. So you hold on. Not because you want to run the function forever, but because you do not have the confidence to let go. Kim and I closed out the leadership milestones with the one that builds that confidence, and my definition is simpler than anything the leadership industry sells: the development plan is the process of actually practicing. I ran the 4x400, and you never hand a baton to someone standing still. Relay teams drill the exchange itself, over and over, and your business already has the practice field scheduled: the monthly meetings, the quarterly boardroom, and the annual budget, which arrive whether you use them or not. We got into Kim's progression for grooming a leader (they shadow you, then you shadow them, then their own team tells you how it is going), why the readiness assessment is really a letting-go checklist, the three questions that tell you whether someone is ready, and the quarterly debrief that tells you early, and honestly, whether they are going to make it.

[00:00] Introduction: How to Confidently Hand Off Leadership 

[03:22] The Problem With Promoting People Too Early

[05:10] You Don’t Know Until You Watch Them Handle It

[10:15 ] Teaching Leaders That It’s Okay Not to Know

[15:32] Building Trust Before the Handoff 

[18:38] You Never Hand a Baton to Someone Standing Still

[21:57] The Readiness Assessment: Can You Let Go?

[22:45] The 3 Questions Every Future Leader Must Pass

[23:05] The Budget as a Leadership Handoff Test

[31:50] What Actually Makes Someone a Good Leader

[32:41] Your Meetings Are the Leadership Practice Field

[46:49] Leadership Development Is Practice

[49:02] The Feedback Loop: Assessing Your Leaders

[51:10] Turning the Leadership Roadmap Into Execution

"So they're kind of growing into the role versus being ready for the role." (@00:03:38) — Kim Clark

"You never know how someone's going to handle a situation in real life until you see them handle the situation in real life." (@00:04:29) — Kim Clark

"You can't just be standing still. I have to hand it off to you. So there's this period in that window: you start running, I then hand you the baton, we're in the same area, we're now both holding it while running." (@00:16:15) — Ryan Tansom

"I'm sure you guys practiced that many times before you actually got into a competition. And I think that's a perfect example of how to groom the next leader into their role." (@00:18:25) — Kim Clark

"The readiness assessment is: what does it look like to actually hand off someone, where we actually trust the person? That's where I think it's the actual letting-go checklist." (@00:20:25) — Ryan Tansom

"My definition of the leadership development plan is the process of actually practicing." (@00:46:33) — Ryan Tansom

This closes the three-episode run through Module 7, the Leadership Team. Milestone 19 made the case that the income statement gives you three seats and two scores. Milestone 20 drew the five-year path to filling them. Milestone 21 is how the seat actually changes hands: not a program you enroll somebody in, but practice you run together inside the quarterly and monthly rhythm you already hold. iBD is deliberately not competing with the leadership programs. We show you what the seat requires and where your person is, so you know exactly what training they need instead of buying whoever knocks on your door. For the applied version, David Kachoui brings his Management Mastery exercise to the community the week after this milestone airs.

Kim Clark is iBD's Chief Revenue Officer and co-hosts the milestone run.

Last episode I made the case that your org chart is three seats, because your income statement is three buckets. The question everybody asked afterward was the obvious one: fine, but I cannot afford a CRO, a COO, and a CFO, so what am I supposed to do on Monday? This is that answer. Kim and I walked a five-year roadmap I built the hour before we recorded, one page per seat, and the thing I want you to notice is what it solves for first. Not the person. The number. Who owns it in year one, how the seat is covered while you cannot afford to fill it, what it costs, and how involved you have to be, year by year, until somebody who is not you owns it outright. We got into the guardrails that tell you what you can afford (they are ratios, not dollars), the five paths to filling a seat and why the CFO and the COO usually want different ones, and the test I would apply to any fractional leader before I signed anything. Kim brought the scenario I think most owners are actually living: you have a Sally, you love her, and you already suspect she tops out below the seat. She made the case for developing her anyway, on purpose, with the ceiling named out loud. Then we closed on the question a client threw at me last week, which is whether a CEO with three good leaders even has a job left.

00:00 Introduction: The Five-Year Leadership Roadmap 

02:12  Solve for the Number, Not the Person

04:18 Mapping Five-Year Growth and Financial Guardrails

08:03 One Seat, One Owner, Every Year

11:21 Your Sales Manager Is Not Your CRO 

17:07 Choosing the Right Leadership Path

20:36 Developing Internal Talent

25:06 What a Fractional CFO Must Actually Own

28:22 Scoring the Function and the Leader Separately

31:59 Building the Team Over Time

35:08 Finance vs. Operations

37:15 Hiring Ahead

40:25 The CEO’s Workload

43:44 Final Takeaways and Next Steps

"I really like your approach that we're going to be going over today, where it focuses on the business targets, the numbers and the process more so than the who." (@00:01:25) — Kim Clark

"Just because we can't get what we want today doesn't mean we can't move that direction. It's okay to deal with less than perfect today." (@00:01:58) — Ryan Tansom

"The ratio is what allows us to see what the dollar amount is, but the ratio is the guardrail." (@00:06:10) — Ryan Tansom

"Jack Stack, I just absolutely love how black and white it was. Like the income statement, someone should have a picture of their face next to every GL code." (@00:07:00) — Ryan Tansom

"I believe Sally's going to tap out at the director level. So over that three-year journey, I'm grooming her, knowing I'm going to replace her and myself in year four. And I think that's fine, because what I've done in that scenario is the business has outgrown Sally's skill." (@00:19:52) — Kim Clark

"There's a lot of times that the fractional leader will also be set up for failure because the owner doesn't know any of this stuff." (@00:29:04) — Ryan Tansom

"What we absolutely should expect is, is the person ready? Damn well, it better be an 81 out of 81. The function might not be ready, but that's why we're hiring them." (@00:30:30) — Ryan Tansom

"If you hire someone ahead, it can't be below them to do the stuff that is required because it's a smaller company." (@00:38:31) — Ryan Tansom

"The goal will dictate the level of effort from the CEO, as well as the level of effort from the functions, as well as then what is the right structure." (@00:39:45) — Ryan Tansom

"This is objective stuff. I think we can take a lot of the confusion, which creates the lack of confidence and creates anxiety in the decision-making." (@00:44:13) — Ryan Tansom

This is the second episode in Module 7 of the iBD Ownership OS, and it picks up exactly where the last one stopped. Milestone 19 made the case that the income statement gives you three seats: a CRO who owns revenue, a COO who owns gross margin, and a CFO who owns cash. Milestone 20 is the path to actually filling them, priced against what the business can carry and drawn across five years rather than solved in one hire. Milestone 21 takes the next step and builds the development plan for the person once the seat is designed, with David Kachoui joining for the applied version.

The roadmap walked in this episode runs one page per seat plus a company page, and it reads like the Owner's Scorecard: you cannot get everything you want today, but you can see the progression and make the trade-offs deliberately. It is built on the five-year forecast, because the forecast is what tells you what you can afford and when.

Kim Clark is iBD's Chief Revenue Officer and co-hosts the milestone run.

Somewhere in your office is an org chart with seven titles on it, and if somebody asked you today who owns revenue, the honest answer is still you. Same for margins. Same for cash. Kim and I opened Module 7 with this episode, and I want to be straight about how I landed on three functional leaders: I am not a leadership guru, and this did not come from a personality test. It came from the income statement. Three buckets. Revenue, gross margin, and everything from SG&A down to net income and cash. One person owns each number. They forecast it, they execute against it, they explain the variance, and the CEO manages those three people instead of seventeen tasks. We walked the whole chain live on a real five-year model, from the board's ownership goals down to the line where cash lands. We got into why the duties never change with company size (only the volume does), what a chief people officer or a CIO is when neither shows up on the income statement, and the two assessments that turn "I think she can handle it" into a number. Then Kim went at the uncomfortable part: what to do when the person you have is not the person the seat needs.

Chapters:

00:00 Introduction: The Three Functional Leaders 

07:18 Three Buckets, Three Seats 

11:09 One Person Owns One Number

16:22 The Job Is the Job, Regardless of Company Size

20:05 Someone Has to Own the Number 

27:09 The CRO, COO & Revenue-to-Margin Accountability 

38:30 The CFO and the Cash Story

43:40 Building Leverage Through the Org Chart

52:59 Scoring the Function and the Leader

59:01 When the Person Isn’t the Right Fit

01:03:35 Being Honest About People and Performance

01:08:19 Recalibration, Expectations & the 90–180 Day Plan

01:12:22 Bringing the Three Functional Leaders Together

01:15:17 Closing & Next Steps

"If this is not Ryan's opinion, because it's math tied to an income statement, tied to double entry accounting, tied to the monks from the 1400s, then this has to be true." (@00:08:48) — Ryan Tansom

"The list of duties doesn't change per company size. The volume of those activities changes." (@00:17:02) — Ryan Tansom

"Thinking about the business through the three functions of the income statement has been the most liberating thing for me ever, because then I'm not confused about what everybody's talking about all the time." (@00:50:48) — Ryan Tansom

"You just have to decide, are you willing to slow things down so that way you can go faster?" (@01:05:55) — Kim Clark

"Would I want to put out a half-baked quality product? No. Well, why do I want to handle a half-baked quality employee?" (@01:06:24) — Kim Clark

This one opens Phase 3 of the iBD Ownership OS and Module 7, the Leadership Team. The Build phase took the income statement apart function by function: the financial system, the revenue engine, the margin machine. Milestone 19 asks who owns each of those functions besides you. Kim Clark is iBD's Chief Revenue Officer and co-hosts the milestone run. From here, Milestone 20 designs the five-year leadership roadmap and Milestone 21 builds the development plan. David Kachoui's conversation on leadership as a trade (Ep. 506) is the companion listen on the people side of the same question.

Budget season is about to open, and I want this conversation back in front of you first. Your CPA says you had a great year. The bank account in March disagrees. That gap is what happens when you budget the income statement and nothing else. Pat Hobby share-screens a real three-statement model and shows the math: how the income statement, balance sheet, and cash flow statement link together, where the bridge row sits between the CEO seat and the owner seat, and how a $2.9M cash position goes negative $1.5M when days sales outstanding drifts from 36 to 75. Same revenue. Same profit. No cash. The point isn't to turn you into a CFO. It's to show you what good looks like so you can judge whether your team is producing it. The 2027 budget season kicks off September 15 with our Strategic Planning & Budgeting workshop: predict your cash, lock your ownership goals, get the three functions pulling toward the same numbers. This is the on-ramp. This originally aired as episode 462: https://independence-by-design.castos.com/episodes/462-budget-season-2026-part-2-from-pl-to-cash-flow-the-model-every-owner-needs-pat-hobby

Chapters:

[00:00] Why Sales Comes First in the Budget

[02:30]  From Sales to Revenue: Building a Realistic Budget 

[07:16] Cash Flow From Operations: The Bridge Between CEO and Owner

[19:08] Why Net Income Doesn't Tell the Whole Story

[24:21] How the Three Financial Statements Connect

[39:51] Budget vs. Forecast: Why You Shouldn't Change the Budget

[44:29] Building Revenue From the Bottom Up

[49:07] Building Payroll Person by Person

[01:03:51] Cash Is the Plug: Making the Model Tie

[01:08:13] DSO and the Cash Conversion Cycle

[01:18:21] From Sales to Owner Cash: Making Better Decisions

[01:29:38] What Good Looks Like: What Has to Be True

"The income statement only tells part of the story. That tells the revenue and expenses for a period of time, a month, a quarter, half a year, a year. That is not the whole story." (@00:30:00) — Pat Hobby

"Cash flow from operations is the number they've got to be held accountable for." (@00:24:02) — Pat Hobby

"I'm not a fan of changing budgets. We're running 20% behind, so let's just change our budget for the rest of the year. Oh, we're right on budget. You're just excusing bad behavior." (@00:46:20) — Pat Hobby

"We grew like gangbusters, and we have no cash, it's right there. We have no cash." (@01:20:53) — Pat Hobby

"It's not acceptable to be in the dark." (@01:37:42) — Pat Hobby

Pat Hobby is a fractional CFO with private equity and operating experience who has built three-statement financial models for owner-operators across industries. He's a regular collaborator with Ryan and one of the few CFOs who teaches the model the way Ryan thinks about it: income statement, balance sheet, and cash flow tied together, with cash flow from operations as the bridge between the CEO seat and the owner seat. Pat share-screens through a real budgeting tool and walks Ryan through the math, the levers, and the seats. Originally aired as Ep. 462; rereleased as the on-ramp to the 2027 budgeting season.

Contact

You have somebody in a leadership seat you are not sure about, and you could not write down why. So the calls keep coming back to you and you stay the one holding the building together. That is the owner-operator trap wearing a disguise, and the honest reason is that nobody ever defined what good looks like in that seat. I opened by asking David Kachoui to separate leadership from management for me and he refused. He does not think they are two things. He thinks the split is mostly stereotyping, and he thinks both are trainable, the same way welding is trainable. So he defined the job as nine things, built a ladder under each one from unskilled to master, and ran it inside his own company until people were training people training people. We get into why your leader's actual job is teaching, why master means developing somebody else instead of being the best one doing it, and the line that stopped me cold. If you hand somebody the same feedback three months apart, maybe they cannot learn it. Or maybe you cannot teach it. Then we close on why none of your AI works until this part is written down.

Chapters

[00:00 Leadership vs. Management: Why They're the Same Job

[07:19] David's Journey to Building Management Mastery 

[09:53] Why Management Systems Matter

[22:04] Why Good People Fail in Bad Systems

[27:58] What Edwards Deming Taught About Great Management

[34:26] The Vacation Test of Great Leadership

[35:54] Values Are Skills, Not Slogans

[40:52] Why Every Manager Must Become a Teacher

[54:04] Three Questions Every Manager Should Ask

[56:18] The Skills Ladder: From Beginner to Master

[01:11:42] When Feedback Isn't Working: Teaching vs. Learning 

[01:30:58] AI Starts with Clear Roles and Job Descriptions

Sound Bites

"One of the big takeaways I got from Deming was that people come in, they want to do a good job. Ninety three percent of the problems you can trace back to management. Management owns the responsibility of the system. A bad system will break a good person every time." (@00:44:47) — David Kachoui

"If you go on vacation and your team is making things better when you're not even there, you come back, that is the best feeling in the world." (@00:50:26) — David Kachoui

"If you're a manager, your job is to be a teacher, to be a coach. And if you're not teaching people, then you are not doing your job as a manager." (@00:56:31) — David Kachoui

"What I personally despise more than almost anything is hypocrisy. I try every single day to bridge the gap between what I believe to be my values and how I act." (@01:01:55) — Ryan Tansom

"The value comes up when there's a trade-off. I have this or that, and the value is what drives the choice. I'm willing to suffer for this value." (@01:07:13) — Ryan Tansom

"If I give somebody this feedback and three months later I have exactly the same feedback, then improvement's not happening. And to be fair, maybe improvement's not happening because I'm not good at training people to this value." (@01:33:01) — David Kachoui

About David Kachoui

David Kachoui is the founder of Conscious Managing and the creator of Management Mastery, a management training system built on the trade apprenticeship ladder: unskilled, novice, apprentice, practitioner, master. He came to business sideways. He trained as an actor in New York and went on roughly 400 auditions, and that is where the whole thing started. Actors work with a hundred different directors and get to watch the same room come out completely different depending on who is running it. Directors never see that. He carried the observation into business, working his way from proofreading in law firms to building pitch books at Morgan Stanley, then into project management, a PMP certification, and an MBA at Columbia, where he met his future business partner Tom Nagler in a first-week team exercise. Tom brought him into Natech, the company Tom's father founded. David spent the next stretch of his career there, discovered W. Edwards Deming in 2013, and built Management Mastery inside the company until it had cascaded through it in tiers, with people training people training people. Natech sold in 2023. David now runs Management Mastery for owners through Conscious Managing.

Resources Mentioned

Contact

You broke your margins out by line last month and one of them came in under target. So you asked your operations manager what happened, and you got told the team is drowning and needs two more people. Then you asked your CFO, who told you you're already overstaffed. Both of them are looking at the same business and neither one is lying. Kim and I recorded this one as the follow-up to the margin episode, because breaking margin out by line tells you that something moved and it will never tell you why. The why lives in three places: whether your people are producing, whether the work is moving, and whether the money is moving. Kim brought the number that makes the case. At one of her clients, the rates of change went negative nine months before the margin actually hit its floor. Nine months of warning, sitting in a report nobody was reading. We got into utilization and the fight every exec team has about the denominator, first-call effectiveness in my old copier business, inventory as trapped cash, and why I would not let anybody build a dashboard or an AI tool until they can name the bottleneck it opens.

Top 10 Takeaways

Sound Bites

"There was about a nine month lead time between what you were seeing in the rates of change and what was actually happening in the margins." (@00:02:17) — Kim Clark

"We need to open up the bottleneck and have more throughput at the exact margins that we want. And that's not going to be on the income statement." (@00:02:36) — Ryan Tansom

"Everyone says, I need more help. What are you doing with your time?" (@00:15:53) — Ryan Tansom

"Claude will gladly build you a bunch of dashboards. And it's a dashboard to nowhere, because it's not tied to anything." (@00:57:39) — Ryan Tansom

"Milestone 17 is helping us focus on the right thing, which is the throughput of the bottleneck in relationship to the goal." (@01:12:37) — Ryan Tansom

About This Episode

This is the second stop in Module 6, Transferable Margins, and it picks up directly from Ep. 504. That episode made margin visible by line and put a target on each one. This one is the diagnosis layer: when a line comes in under target, where do you look, and what do you do about it. Kim Clark is iBD's Chief Revenue Officer and co-hosts the Module 6 run. Module 6 closes with the business operating system that holds the whole stack without the owner.

Resources Mentioned

Connect

One of your revenue lines looks incredible on paper. Another looks barely worth doing. Before you act on either, somebody has to answer what it actually costs to deliver each one, and in most companies nobody has.

Kim and I are opening Module 6, Transferable Margins, with Milestone 16, and the honest version of this milestone is not a spreadsheet. It's an agreement. I told the story of my family's copier company, where we ran four divisions and every one of them lied to us in a different direction. The sales reps' entire salary sat in equipment cost of goods, so print looked healthy because it had no salespeople in it. We couldn't sell print without them. IT services looked fantastic because the whole industry parked that payroll in overhead. Document management looked like 95 percent margins until you counted the years of service behind the sale. We had no visibility into what we should do more of and why. Kim brings the revenue seat to it: her rates of change, the monthly margin-by-customer review, and the annual audit she calls losing the losers. Start with the benchmark. Then ask what your competitors put inside it.

Top 10 Takeaways

Chapters:
(00:00) Kicking off module six after predictable revenue sets the foundation
(04:19) Revenue meets margins: the CRO and COO trade-off
(05:30) Defining transferable margins and breaking out true line costs
(09:56) Revenue is the CRO's number, margins belong to the COO
(12:05) Finding your industry benchmark through an investor's-eye view of margins
(17:00) Rates of change, three-month trends, and boiling-frog cost creep
(25:29) The Goal, throughput, and does the customer value it
(29:58) Customer profitability reviews and the annual lose-the-losers audit
(31:43) Ryan's copier company: four divisions, four hidden costs
(39:45) Start with industry benchmark, then check what's included
(42:46) Test every cost: equipment depreciation belongs in cost of goods
(47:00) Land on cost rules, consistency, and the CPI curveball

This episode was produced by Castos Productions.

Sound Bites
"We might end up having a problem where I say our revenue is declining on our most profitable work, and our revenue is increasing on our least profitable work. That's a conversation the COO and I as a CRO are going to need to have." — Kimberly Clark
"With those four divisions, we had no visibility on what we should be doing more of and why at any given point." — Ryan Tansom
"My dad used to say, where there's mystery, there's margin. That's why we make it complicated." — Ryan Tansom
"I haven't seen most people go through the process of even getting agreement on where they stand." — Ryan Tansom
"It's better to be slightly off, but still be able to have a baseline to compare to over time, than it is to keep trying to tweak and adjust to reach perfection." — Kimberly Clark
"We don't want to do that to our business. We want real information, even if it's bad." — Ryan Tansom

Resources:

The Goal (Eliyahu M. Goldratt) — the Theory of Constraints book Ryan names when he moves from margin to throughput inside a line. — goldratt.com

90-Day Boardroom Blueprint — where owners build the three-statement model and the per-line margin breakout with Ryan and Kim. — independencebydesign.io

Ray Dalio — Ryan quotes him on worry: if you're worrying, you don't need to worry, and if you're not worrying, you should worry. — principles.com

Consumer Price Index (CPI), U.S. Bureau of Labor Statistics — the closing argument. Ryan's point is that it has no unit of measure and a shifting basket. — bls.gov/cpi

Related episodes:

Ep. 503 — Ryan & Kim: How to Stop Automating Chaos and Get Revenue Data You Can Trust — listen

Ep. 502 — Ryan & Kim: How to Map Your User Journey and Stop Lighting Marketing Money on Fire — listen

Ep. 499 — Ryan & Kim: How to Build the Revenue Blueprint That Makes Growth Predictable — listen

Ep. 492 — Ryan Tansom: How to Analyze Your Margins and Gross Profit — listen

Ep. 489 — Kim Clark: The Profit War Room — listen

Ryan Tansom Website: https://ryantansom.com/

Kim Clark — Chief Revenue Officer, Independence by Design (co-host)