Ken LaCroix, Chief Insight Officer at Insightful Partners, brings a sharp leadership lens to financial strategy. In this episode, he explains why a good CFO doesn’t just report history—they help leaders forecast and shape the future. Ken shares stories from the trenches, including uncovering a private jet buried in company expenses, and warns how these tactics might slash a company's valuation.

He breaks down common leadership missteps: over-reliance on a single client, underinvesting in marketing, and clinging too tightly to founder control. Ken pushes leaders to hand off responsibility, plan for exits—even if they never intend to sell—and value their businesses like an outside investor would. Whether you’re preparing for an acquisition or planning to pass the torch to the next generation, Ken's insights are direct, actionable, and critical for any serious business leader.

Want to learn more about Ken LaCroix's work? Check out their website at https://insightfulpartners.com.

Connect with Ken LaCroix on LinkedIn at https://www.linkedin.com/in/kenlacroix/.

Think you'd be a great guest on the show? Apply at https://podcast.allies4me.com/podcast-guest/.

Want to learn more about Craig Andrew's work at allies4me? Check out his website at https://allies4me.com/.

Key Points with Timestamps

• 01:00 – Introduction of Ken LaCroix and the role of a fractional CFO

• 02:15 – What fractional really means and why strategic finance is a leadership lever

• 04:00 – The story of a hidden company jet—how financial oversight reveals values

• 06:25 – Tax deferral vs. tax avoidance: how it impacts valuation

• 08:00 – Treating finances like diagnostics: leadership without shame or judgment

• 09:25 – Customer and vendor concentration: risks leaders often overlook

• 13:11 – Why big companies stay stuck and small firms can be more agile

• 17:10 – Distributions vs. reinvestment: does your behavior show confidence?

• 20:24 – The founder bottleneck: why leaders must build a management team

• 22:25 – Even if you won’t sell, value your business every year

• 27:02 – Preparing the next generation: don’t let kids start in the family business

• 31:30 – Marketing isn’t an expense—it’s a long-game investment

• 34:55 – Why percentage-of-revenue marketing budgets miss the point

• 37:00 – Closing thoughts and how to connect with Ken LaCroix

Transcript

00;00;00;00 - 00;00;30;20
Craig Andrews
I was in a coma for six weeks while the doctors told my wife I was going to die. When I woke up, she told me the most fantastic story. My team kept running the business without me. Freelancers reached out to my team and said, we will do whatever it takes. As long as Craig's in the hospital. I consider that the greatest accomplishment in my career.

00;00;30;23 - 00;00;51;10
Craig Andrews
My name is Craig Andrews and this is the Leaders and Legacies podcast where we talk to leaders creating an impact beyond themselves. At the end of today's interview, I'll tell you how you can be the next leader featured on this show.

00;00;51;16 - 00;01;21;28
Craig Andrews
Today, I want to welcome Ken LaCroix. He is the chief insight officer with insightful partners, a fractional CFO firm that he, formed. He's been guiding businesses through rapid growth, restructuring, mergers, acquisitions throughout his career. And he focuses on leveraging technology investments to increase productivity. Now, a lot of people get, a little bit bored when they hear that the financial folks are coming.

00;01;22;00 - 00;01;55;12
Craig Andrews
And one of the most powerful things that Ken said to me, before we hit record is he is there to help predict the future rather than just telling history. So if you are running a business and your books are only telling history, or worse yet, not even telling history, well then this is an episode that you should dial into because without doubt, for you to be able to run your business well, you need numbers that can tell you what's going to happen in the future.

00;01;55;14 - 00;01;58;09
Craig Andrews
And we're going to talk about that. So Ken, welcome.

00;01;58;12 - 00;02;00;12
Ken LaCroix
Thank you Greg. Thank you.

00;02;00;15 - 00;02;15;09
Craig Andrews
Yeah. So, first off, let's, What does a fractional CFO. There's been kind of an explosion of the fractional term. I may fractional chief marketing officer. What's a fractional CFO?

00;02;15;12 - 00;02;40;13
Ken LaCroix
Yeah. So think of it. And what? It's not. So it's not a full time position. It's not a temporary position. It's not an interim position. It's a piece of a full time equivalent, if you will. So most businesses that we deal with 5 million in revenue of 50 million in revenue, there's not really a need for a full time CFO.

00;02;40;13 - 00;03;02;15
Ken LaCroix
And I think more importantly for a really good CFO, that really wouldn't interest them, there's not there's not as much changes in businesses under 50 million to keep it. You know, keep it interesting to keep people learning, to keep all of that. So CFOs tend to gravitate towards larger companies where, again, they could build their skill set and be challenged.

00;03;02;15 - 00;03;25;21
Ken LaCroix
And so the opportunity to to do a fractional CFO, which says, I will use as much of the strategic finance function as I need at any given time. Call it the month, call it the quarter, call it the year that that the ability to consume the strategic finance function or strategic marketing function is what really sets that fractional model apart and can be really advantageous.

00;03;25;24 - 00;03;54;11
Craig Andrews
Yeah. And when I explain it from the marketing standpoint, from this fractional chief marketing officer, one of the things I'd say is, look, your business can't afford to hire a talent of our caliber full time. You just can't afford it. And so it's and it's more of a strategic ad talent. So what you're bringing is a strategic talent that, you know, 100 million, 1 billion other businesses have.

00;03;54;11 - 00;03;58;28
Craig Andrews
But the 5 to $50 million businesses can't afford full time.

00;03;59;00 - 00;03;59;27
Ken LaCroix
Yep.

00;04;00;02 - 00;04;00;21
Craig Andrews
Yeah.

00;04;00;23 - 00;04;02;27
Ken LaCroix
Very well said.

00;04;02;29 - 00;04;38;27
Craig Andrews
So you know, one of the things I find numbers, I find finances fascinating because, you know, people look at them in different ways, you know, like, in one way, we were talking about in the green room was how engineers calculate finances versus how accountants find. And it's just they're coming out from a different perspective. But what I find even more fascinating, I've had some tax strategists on, and they've told me about some of the crazy, crazy deductions that they've seen people take in taxes.

00;04;39;00 - 00;04;51;00
Craig Andrews
And so I know as soon as I have somebody on that's dug into some of these books, there's some crazy story about something you found hiding in the books.

00;04;51;02 - 00;05;16;14
Ken LaCroix
Yes. We we run across plenty of interesting things. I would have to say the most interesting, was I think it was, research on the balance sheet and research expenses on the income statement that after a few months of looking into some, some sizable and variable expenses, we determined it was actually their personal plane. And so a lot of people have planes in their business.

00;05;16;21 - 00;05;45;01
Ken LaCroix
They have to fly to different places, different locations. But in this particular case, they had ten locations, all in the same county here and here in Orange County and, California. And, it took us a while, of, of sleuthing, if you will, to uncover it. The business owner eventually came clean. But that was I think that was the, you know, the most interesting find we found for, assets and expenses that probably don't relate directly to the business.

00;05;45;03 - 00;05;48;02
Craig Andrews
So when they eventually came clean, what do you say?

00;05;48;04 - 00;06;06;02
Ken LaCroix
Well, and again, we have this conversation because we consider ourselves, you know, more like more like a doctor, if you will. We don't care what the answer is. We just want to know that there is an answer and we can use it going forward. So, you know, he was ashamed. He was he was sheepish. He felt as though he would get reported in some way.

00;06;06;02 - 00;06;25;12
Ken LaCroix
And and that doesn't happen. We just look at it and say, okay, well, I think that helps you on your tax strategy. It definitely helps you, you know, reduce your taxable income. But boy, does that really affect your valuation. And in this particular case, they were driving towards an exit and we were able to have a good conversation about, look, it's time to start paying taxes on this stuff.

00;06;25;12 - 00;06;51;22
Ken LaCroix
I get where you're coming from. Everyone should have a tax deferral strategy, not a tax avoidance strategy, but tax deferral strategy. But now it's time to start leaving some of that value in the business. Start showing the true operations of the business, the true profitability of the business, because you'll get multiple times over that valuation when you sell versus the the tax savings that you get by sort of running those personal expenses through the business.

00;06;51;24 - 00;07;13;28
Craig Andrews
Yeah, yeah. You know, it is funny. You know, you talked about it in the context of a doctor. You want to tell your doctor everything you don't. You know, when turned into a game of, you know, mystery for your doctor, I would say the same for attorneys. You know, I, I, you know, I went through a divorce in my attorney very early.

00;07;13;28 - 00;07;32;00
Craig Andrews
He said, all right, Craig, I'm here for you. Just tell me what's the biggest dirt she's going to pull out on you? Because I'm going to be able to represent you better if I know it on the front end. And I guess the same is so for you. Is you. You're not there to report anybody to the IRS.

00;07;32;00 - 00;07;35;10
Craig Andrews
You're there to help them achieve their goals.

00;07;35;12 - 00;08;01;08
Ken LaCroix
Nor to make judgment. I think, you know, in our case, a lot of times we find there's reticence to setting a target because the business owner or the management team feels compelled then to hit that target. Now, there's there's advantages to setting that target and wanting to hit that target. But if there's as much value in missing the target as there is in making the target, and we really try and sort of devalue this, you know, land the plane exactly where it needs to land.

00;08;01;10 - 00;08;24;23
Ken LaCroix
If you overshoot your target, you want to know where you succeeded. If you undershoot your target, you want to know where you can fix things. Both those are good results. If you happen to land it perfectly, you may or may not learn something from it. So. So we like those differences. So, you know, we have those conversations. And the reason I bring up a doctor is because I don't think doctors go home at the end of the day and say, you wouldn't believe this body that I saw today.

00;08;24;23 - 00;08;42;04
Ken LaCroix
It was, you know, I had all these different things happening with it. To them, it's very technical. There's always good things, there's always bad things. There's always things to be worked on. There's always things that are working well. We don't sit around and talk about, oh, you wouldn't believe, you know, you know, the sales at this company, it's just a diagnostic for us.

00;08;42;04 - 00;09;03;24
Ken LaCroix
It's just a piece of information. What we care about is what what can we do with that to help you, the business owner, your management team, the business move forward and start accomplishing those strategic things that you want to accomplish, that add value that reduce risk, improve profitability, things around that nature.

00;09;03;26 - 00;09;25;04
Craig Andrews
Well, then one of the things that you said in regards to the story about the airplane, that you know, they're heading for an exit and they probably didn't realize that was hurting their valuation. And I've seen a few things, you know, I've heard some CFOs give some advice that surprised me of things I never thought would hurt the valuation, but did.

00;09;25;09 - 00;09;28;13
Craig Andrews
And what are some examples that you would bring out?

00;09;28;15 - 00;09;50;25
Ken LaCroix
So I think this this really talks about the concept of what got you here won't get you there. So one of the first things that we look at when we bring a client on board is we look for concentration risk. Usually that's concentration risk around customers. And when you first start your business you want to do everything you can for that first customer you get.

00;09;50;28 - 00;10;07;12
Ken LaCroix
And then you want to grow that customer as fast as possible. Because what you're trying to do is get as much activity in your business and find the right things to do as fast as possible. Test those things in the marketplace and figure those things out so it makes sense to have a handful of customers and do everything for them.

00;10;07;14 - 00;10;27;06
Ken LaCroix
But at some point, you reach the point in the business where if that customer leaves, it creates a big risk and a big revenue issue and a big profitability issue. So an outside company coming in to value your business, it's going to look at how many, how what percentage of your sales is in your top five, five customers, top ten customers.

00;10;27;06 - 00;10;55;04
Ken LaCroix
That's top 20 customers. Because the theory for an incoming buyer is they don't have that relationship with that particular customer or client that you had. So if you exit your business and leave, that business may leave as well. And so what they're looking for when they purchase a business is distribution across a number of, of customers or clients, so that if any one of them leaves, it doesn't truly impact things, especially upon, you know, the founder leaving or something like that.

00;10;55;04 - 00;11;21;05
Ken LaCroix
So we immediately start trying to de-risk things. Usually it's around customer concentration. Sometimes it's around vendor concentration. I think Covid taught us vendor concentration is a real risk. I think prior to 2020, I would scream from the rooftops that we really need to have multiple suppliers and the, the, the feedback for the last 25 years has been. But but it's very reliable to get these these these things from overseas.

00;11;21;05 - 00;11;44;08
Ken LaCroix
It's very reliable. With my supply chain I can I can load up all of my activity with one supplier. I can get the best possible price from that supplier. It makes sense. And I think those supply chain disruptions taught us that while you're getting a lower price, you're paying a risk premium for that, if you will. And so it's, you know, it behooves you to start looking at secondary sources.

00;11;44;08 - 00;11;54;21
Ken LaCroix
Third, sources. Now the conversation around tariffs much of the same thing. So we try and reduce concentration rates wherever we can. That's sort of job one when we come on board.

00;11;54;24 - 00;12;10;00
Craig Andrews
You know there's there's a company here in Austin that would give you absolutely heartburn. It's $1 billion business, I think maybe 1.5 billion in revenue. 80% of their revenue comes from Apple.

00;12;10;03 - 00;12;11;26
Ken LaCroix
Yep, yep.

00;12;11;28 - 00;12;41;01
Craig Andrews
And this is not a new thing. This has been going on for, I think almost as long as the iPhone's been around and, and they, they and let's, let's talk about this. Let's talk about this for a second because. They've known that that's an issue. They know that's a risk. They have a board of directors. Nobody's blind to this.

00;12;41;03 - 00;13;11;00
Craig Andrews
But it's a problem they haven't fixed. And in, you know, approaching two decades. And so. Imagine if you were advising a company that 80% of their revenue was from a single customer. And what happens, of course, is when that customer has a need, immediately they get the resources they need at the expense of developing other, you know, diversifying their client base.

00;13;11;02 - 00;13;19;00
Craig Andrews
So if you're meeting with somebody and you discover that in their books, what would be your advice to them?

00;13;19;02 - 00;13;40;14
Ken LaCroix
We love this question. So it really it speaks to the agility of the smaller business versus the rigidity of the larger business. And by that I mean, when you're a billion, billion and a half dollar company and 80% of your revenue is with one particular client or customer, a 10% change or 10% swing in that is a giant number.

00;13;40;19 - 00;14;03;04
Ken LaCroix
It's a giant number. And so what we find is that the larger companies have everything in their organization built around that business model. So the compensation plans for everybody are built around 80% of their business being with Apple, their research and development, their customer service, their whole corpus of the entire organization is usually focused around maximizing that opportunity.

00;14;03;06 - 00;14;31;28
Ken LaCroix
And so what, what, what, what really needs to happen is some sort of a disruption, some sort of a, time where you say, look, we're going to earn less for a short period of time before we earn more in a different arena. So there there needs to be an investment in disruption and investment and change that has worse results for a short period of time, that sort of that change management curve, the J curve things will be worse before they get better, but then they get better in a much better way.

00;14;32;05 - 00;15;00;20
Ken LaCroix
So we think the smaller the company, the more agile the company. And that's where a lot of that's where a, a 10 million in sales company can really compete against $1 billion sales company, because they're going to be looking for all the small minded opportunities that they can potentially leverage and get in there. Whereas if you try to introduce change into $1 billion organization, you're going to have a fleet of salespeople that are going to be very, very upset about their compensation changing because of the different business model, and they may leave the organization.

00;15;00;20 - 00;15;29;02
Ken LaCroix
And those are reasons why you keep doing the same thing at those larger organizations. So it's really understanding what needs to happen. Again, you know, things will get worse before they get better, but if they started this process three years ago, then they'd already be at the point where they have multiple customers in multiple segments with multiple products and multiple pieces, and their their EBITDA multiple on a sale would be much higher, I would imagine.

00;15;29;04 - 00;15;57;28
Craig Andrews
Yeah. Well, you know, there's there's a company in my past, I, I used to work for a company that right before I joined them, I don't know if it was 80%, but the majority of their revenue came from Nokia. Nokia mobile phones, and Nokia had a different approach. They're really smart. And they approach my company and they said, you're not a reliable supplier to us when so much of your revenue comes from us alone.

00;15;58;00 - 00;16;22;19
Craig Andrews
We want you to split your engineering team. We want you to split your staff. And we're not saying give us all the good guys, all your top engineers. We want an even split, you know, down the tiers of talent. And we want you to form another product line that sells, that targets our competitors. What's interesting is that company that I work for is still in business today.

00;16;22;21 - 00;16;27;14
Craig Andrews
Nokia is as a mobile phone provider, is not right.

00;16;27;17 - 00;16;48;25
Ken LaCroix
So I think that the European company approach and certainly the Japanese approach, it supports that. You know, supplier health is very, very important to Toyota. They spend a lot of time on ensuring that their supplier health, and they were challenged in the Fukushima earthquake and issues around that. And, you know, they really learned some things around that incident.

00;16;48;25 - 00;16;54;25
Ken LaCroix
And they worked really hard on supplier partnerships and I don't think we do enough of that in the United States.

00;16;54;28 - 00;17;10;16
Craig Andrews
Yeah. So let me jump back to valuations, things that impact valuations. And let's talk about distributions for a privately held business. What's your advice on taking distributions.

00;17;10;18 - 00;17;41;12
Ken LaCroix
So you're certainly as an owner you're certainly entitled to distributions. And usually when you first start your business you don't have any. There's nothing there. You have contributions. So we certainly understand the desire to pull some money out. What we often find because of tax strategies, tax deferral strategies, tax avoidance strategies and distributions, we find that over time that that tends to be the wouldn't.

00;17;41;19 - 00;18;06;24
Ken LaCroix
What you're in essence doing is pulling value out of the business. You don't have those resources in the business in terms of working capital or or assets or things that would be attractive to another buyer. So those would be monies that would have to be reinvested in the business to do new product development or to do, you know, additional sales in a different channel and any sort of development around new things.

00;18;06;27 - 00;18;27;12
Ken LaCroix
And so while we certainly understand the desire to pull money out and the right to pull money out, and by all means celebrate pulling money out, at some point you need to start leaving money in the business again. You need to start paying taxes. You need to start so so that, you know, you're you're you're operating margins and your net margins reflect reality in the business.

00;18;27;14 - 00;18;47;28
Ken LaCroix
And you need to leave that working capital in so that you have dry powders, that you have things that that that will help you weather any issues or problems. So I think it's great when you can do it, and then you sort of develop that discipline to not do it and leave it in there, but we've characterized that as selling small pieces of your business to yourself every year.

00;18;48;00 - 00;18;54;08
Ken LaCroix
And then by definition, there's left less left over to sell to, to another person.

00;18;54;11 - 00;19;12;18
Craig Andrews
I love that. I love that description. You know, I had a M&A, consultant put it to me this way when when you're taking distributions, a potential acquire says, oh, you believe a mutual fund is a better investment than your business?

00;19;12;20 - 00;19;37;20
Ken LaCroix
I love that analogy. We talked to business owners. There's sort of a corollary around financing. We talk to business owners that talk about, you know what? I'm I run my business, you know, so well. In fact, we have zero debt. And I often say, oh, you don't believe enough in your business to leverage anything about your business. So kind of a similar corollary, if you have confidence in your business, that's where you want to put your assets.

00;19;37;27 - 00;19;56;00
Ken LaCroix
We always want to distribute the risk, right. Pull some things off the table, take some things out of the business, invest in a different asset class. That's risk management. But in terms of pulling the money out of the business and either spending it or putting it in another, another account to earn a return, yes, that means that you have less confidence in your ability to leverage your business.

00;19;56;02 - 00;20;02;27
Ken LaCroix
Then then then, then you otherwise would. That's a great analogy I like that.

00;20;02;29 - 00;20;24;00
Craig Andrews
Yeah. What are some other things you see business owners doing that that hurts the valuation, you know. So let's spend a few minutes talking about people who are moving towards an exit. What are some common mistakes that people make that hurts the valuation of their business?

00;20;24;02 - 00;20;54;28
Ken LaCroix
They have not handed off the responsibility of everything in the business to a management team. And I think for, for an entrepreneur that's growing, I think that that first hire, that first sort of hand off of responsibility, particularly in an area that they focused on. So a lot of entrepreneurs have a sales focus. They build their business because they could sell so that their first VP of sales is a very difficult hire, because they'll never do it as well as the founder will.

00;20;55;01 - 00;21;18;09
Ken LaCroix
And it takes usually, unfortunately, about three hires before it all gets worked out. It's difficult on the incoming person and it's really difficult to to transition these things if the person is an operations person. Engineers, for instance, are very focused on operations. Often then that that general manager that they hire or that VP of operations, that's the most difficult hire that they need to do.

00;21;18;11 - 00;21;43;24
Ken LaCroix
So, you know, we're sort of fortunate. There's very few founders that sort of come from the finance side. So it's a little easier for us to jump in and help explain things. But I really feel for that relationship between handing off the marketing side, the sales side, the operations side, some of those areas, because the, the, the business owner really has to think about, look, it doesn't matter that I know how to do this really well.

00;21;43;27 - 00;21;50;14
Ken LaCroix
I have to let others come in and either potentially make mistakes so they learn or potentially do it better than I can do it.

00;21;50;16 - 00;22;03;05
Craig Andrews
Yeah, or they have some version of my story where I unexpectedly go into a coma and I need people left over that can still run the business in my absence.

00;22;03;08 - 00;22;05;22
Ken LaCroix
Yep, yep. Let's see.

00;22;05;23 - 00;22;25;03
Craig Andrews
Though. Yeah. All right. So that that's people moving towards an exit. Let's talk about the group of people that say, I'm not even thinking about an exit. I just this is my business. I'm going to ride into the grave or whatever. I'll figure it out later. What are common mistakes that you see them making?

00;22;25;06 - 00;22;41;07
Ken LaCroix
So what I say to those people is two things. Number one, you are going to get some unsolicited offers because a lot of people say, you know, I'm going to hold I'm going to hold this business. And if someone comes along and gives me a, you know, an offer, I'll consider it then. Well, I have a little talk.

00;22;41;07 - 00;23;08;00
Ken LaCroix
I give that an unsolicited offer. Is the worst position to be in. Your buyer knows far more about your business than you do. Separate topic, separate issue. But let's talk about this concept of valuation. Why don't you just do this? Why don't you just every year value your business and decide, make the proactive decision that you're going to sell your business to yourself and you're just going to say, look, my return on this business is this much my risk in this business is this much.

00;23;08;03 - 00;23;21;29
Ken LaCroix
It's still a great asset. And so I'm going to sell it to myself. I'm not going to worry about selling anyone else. And then you go throughout the year. Sometimes we get we suggested every quarter, but let's just say you go throughout the year to get to the end of the next year. You say, what is my business worth now?

00;23;22;02 - 00;23;40;00
Ken LaCroix
Has it improved? Has it, has it, you know, how much would a buyer pay for my business now and sell it to yourself men as well, that just because you're going to hold the business and never sell, doesn't mean you shouldn't be maximizing its value at any given time, because at some point we are going to experience the Ford, the Fords.

00;23;40;00 - 00;24;01;02
Ken LaCroix
Right? There's death, disability, divorce, and, you know, dissolve it. Right. There's things that happen. And so you might as well prepare for things to end tomorrow while you imagine running your business forever. Two things can be true at the same time. And so, just just create that mindset of how much value did I add to the business?

00;24;01;02 - 00;24;15;14
Ken LaCroix
Did the team add to the business? Did the business add to the business in the last year? And are we proud of that, or are there things we should do to make it more valuable? Just because it's a valuable business doesn't mean you have to sell it. And we think higher, higher returns inside your business is always better.

00;24;15;14 - 00;24;20;00
Ken LaCroix
Higher profitability is always better, less risk, always better.

00;24;20;02 - 00;24;47;00
Craig Andrews
You know, the, the Seinfeld team, the sitcom Seinfeld, they would meet every Christmas once they start, got, got going, and people knew who they were. They would meet every Christmas and decide, do we want to do another season? And they eventually got to the point where they're like, no, we, we've we think we've done what we came to do.

00;24;47;02 - 00;25;21;08
Craig Andrews
And as a result, they were able to leave on top and everybody remembers them as just one of the best sitcoms in history. And and so when you're given that advice about every year, sell your business to yourself. It's I see the wisdom in that. I see the wisdom in that, you know, and the, I know my own weakness as well, enough that it's too easy for me to fall in love with what I'm doing and not necessarily make the, you know, the best choice.

00;25;21;08 - 00;25;43;13
Craig Andrews
I mean, when I came to Austin, I was acquired by another, or I joined a semiconductor company that within two years sold off the division. And I hated it, because I like working for that company. But the reality is, when I look at, in retrospect, they probably sold the peak valuation of that division. If they had waited one year, they would have been lucky.

00;25;43;13 - 00;25;46;06
Craig Andrews
They've gotten half of what they sold it for.

00;25;46;08 - 00;25;52;04
Ken LaCroix
Wow. It's rare to find that perfect timing.

00;25;52;06 - 00;26;03;12
Craig Andrews
But it's anyway, I like that. I like that perspective of every year. Sell the business to yourself and figure out, hey, would I be willing value it? And then what? I'd be willing to pay this much.

00;26;03;15 - 00;26;19;03
Ken LaCroix
It also kind of puts you in the mind of the outsider. It's so easy in a business to stay so focused on what's happening inside the four walls. It sort of makes you go outside and say, look at your business from sort of the the four walls from the outside. What? Let's look at it through this window, the window evaluation.

00;26;19;06 - 00;26;43;01
Ken LaCroix
Let's looking at this window from the the window of risk analysis. Let's look at it from a diversity standpoint in terms of of of what new opportunities do we have. Let's look at it from the window of development. What do we have in the hopper for new products coming along. And so I think it's just a valuable exercise for everyone to sort of stop working in the business and start working on the business for a short period of time.

00;26;43;03 - 00;27;02;21
Craig Andrews
Yeah. Okay. Let's talk about one last group of people. And this is a group of people that are trying to build their business up so their kids can move in and, you know, pick up the business from them. What are the biggest mistakes you see those folks making?

00;27;02;23 - 00;27;30;15
Ken LaCroix
You know, it's a it's a very noble thing to want to pass your legacy on to second generation. And it's just a wonderful, wonderful thing to be able to do. The single biggest problem issue that, that, that we see is it's it's really important for that second generation to get some sort of training, more importantly, validation and understanding and a sense of self outside the business.

00;27;30;18 - 00;27;50;21
Ken LaCroix
So we don't think that their first job should be in the business. We don't think that their career out of college should be in the business. We think they should go to college or go to higher education or some some form of education outside of the business, so they can develop that sense of self. They can develop that sense of I can accomplish things.

00;27;50;24 - 00;28;07;17
Ken LaCroix
Then they bring that confidence back to the business. And they also bring potentially some outsider's points of view as well, which can be helpful. And then all of a sudden, I think it's an even more even playing field for that transition from Gen one to Gen two. And we've seen so many businesses that don't make it through Gen two.

00;28;07;19 - 00;28;31;12
Ken LaCroix
And I think in large part it's because all they know is what they were told inside the business and having that separate, you know, second perspective, outsider's perspective is very, very important. The passage of time means things are going to be different than they were when they started, but also the the management style, the personality style, the the situations are different in generation two than they are generation one.

00;28;31;14 - 00;29;05;15
Craig Andrews
Yeah, yeah. You know, I look at different businesses, you know for instance Walmart now financially Walmart's a massive success. But I feel like when Sam Walton died, the values that made Walmart, Walmart died with him. His kids took the company in a different direction. Versus there's a big grocery store chain in Texas called H-e-b, and it's now on the third generation since Harry.

00;29;05;15 - 00;29;28;15
Craig Andrews
But for those that don't know, H-e-b was Harold E but or Harry. But they like, let's call it H-e-b. And and you know, the third generation of butts are running the business and they've they've remained remarkably close to the original vision that was founded on my senses. That's rare.

00;29;28;18 - 00;29;30;29
Ken LaCroix
We think very rare.

00;29;31;02 - 00;29;33;28
Craig Andrews
Yeah, yeah.

00;29;34;01 - 00;29;53;03
Ken LaCroix
And again, it has to do it, you know, I'll, I'll, I'll paint the sort of the responsibility at the feet of the Gen one folks. It's hard to say. Look, I want you to take over this business, but I don't want to I don't I don't want you to be here for ten years. That's hard to do because you want to be around your kids.

00;29;53;03 - 00;30;28;07
Ken LaCroix
You want to see them succeed. And when your kids are in another organization and they're having challenges and, you know, the the tendency is to want to minimize those challenges where in reality, most lessons, most moments, and certainly the confidence comes from overcoming those challenges. So it's difficult to do. But I think I think that's you're, you're, you're better sense of success because Gen two or Gen three has to be able to go toe to toe with Gen one has to be able to say, look, what work them did is not going to work now to take us forward.

00;30;28;07 - 00;30;37;03
Ken LaCroix
We need to do this. They need to be able to stand toe to toe, not always take the deferential piece of of parent and child.

00;30;37;06 - 00;31;11;00
Craig Andrews
All right. And so the last thing I want to talk about, I have a very, very personal interest in. And that is marketing budget. So it's something, you know, I obviously I'm a fractional CMO, so I'm, I'm, I'm a very interested party in this. But I run into all sorts of thoughts and the, a lot of the businesses I run into don't have a well thought out way of figuring out how much they should spend on marketing, and most of them think whatever it is, they should spend less.

00;31;11;02 - 00;31;30;12
Craig Andrews
And, which of course hurts me. But I'm, you know, I'm biased. What's your take? Which what's the advice that you would give to companies when they're, you know, looking at their putting together that growth plan? And again, you know, do I take distributions or do I invest in marketing to grow the business or invest in some other way, but specifically marketing.

00;31;30;12 - 00;31;43;28
Craig Andrews
How do you advise people, to set and measure? Obviously you want to measure the effectiveness of your marketing budget, but, how do you advise them to set it and then measure it?

00;31;44;00 - 00;32;13;12
Ken LaCroix
So it it begins with a discussion around around marketing investment instead of marketing expense. First of all, because they do view it as an expense. And then it becomes a question of expectations. What are our expectations around marketing and results from marketing? Because what we find in general is that people wait too long to implement marketing. They wait until there's some problem or issue, when in reality they should be investing in marketing when things are going exceptionally well.

00;32;13;14 - 00;32;44;13
Ken LaCroix
The company you mentioned before with 80% of their business with with Apple, they should be marketing the heck out of an additional market, an additional product line, an additional customer, something because when you need marketing to succeed, it's almost too late. Because marketing is the long game, sales is the short game, marketing is the long game. And it's often very, very difficult for business owners that have only looked internally in their business and only see sort of what's working for them.

00;32;44;13 - 00;33;04;16
Ken LaCroix
It's hard for them to see the opportunities in the marketplace, and then it's hard for them to to paint things in, in the, in the way that their potential customer or their current customer that's frustrated, looks at things so that they can solve those problems. So our our business owners say what what percentage of sales should I spend on marketing.

00;33;04;16 - 00;33;27;19
Ken LaCroix
And we just dislike that question like, there's no tomorrow. We I would answer that is just enough and not too much. And so that's not an answer. Right. So so I would just say invest in marketing earlier rather than later and really think through what the expectations are, because we see too many people pull the plug on marketing too early, and it takes a long time for marketing to work.

00;33;27;19 - 00;33;38;06
Ken LaCroix
It takes that that flywheel effect, that momentum effect takes a long time, and we find people pull the plug just too early, and then they're back at square. Square minus one. Not even square zero.

00;33;38;08 - 00;34;09;05
Craig Andrews
Yeah, yeah. And I from my side of the table, I run into so many people that when they start seeing, marketing results in a month or two months or three months. And when my mentors wildly successful, it said what he's found in decades of of work is things that work quickly don't work long term. Things that work long term don't work quickly.

00;34;09;07 - 00;34;12;08
Ken LaCroix
Very well stated, very well stated.

00;34;12;10 - 00;34;45;17
Craig Andrews
Let me, let me ask you, I was surprised a little bit by your percent. You don't like the percent of revenue? And let me just kind of give you the context I'm coming from. So according to Deloitte, right now, the average percent of revenue that they're seeing spent is about 13%. Now. They're covering mostly enterprise companies, small business association, reports somewhere between 6 and 8% of revenue goes to marketing.

00;34;45;19 - 00;34;55;06
Craig Andrews
And I respect the fact that you don't like that as a metric. What's wrong with it? And how do we find what the right number.

00;34;55;09 - 00;35;26;17
Ken LaCroix
Thank you for that challenging question. So we don't think we don't think averages apply. We think averages hide successes and failures. They hide both ends of the, of the distribution, if you will. So we think you should do a very detailed analysis of what you need to do for marketing. And if you can accomplish the same thing with an 8% of your revenue spend instead of a 10% of a revenue spend, then do that, allocate that 2% somewhere else.

00;35;26;20 - 00;35;51;29
Ken LaCroix
So we always want to measure how much we're spending on marketing, but we also want to make marketing the most effective thing that we do. And I think that to say that, well, we're just going to allocate 12% or 10%, you miss the the opportunity to either spend more and really leverage your business or find a way to be more efficient and more effective and repurpose those dollars somewhere else.

00;35;52;06 - 00;36;11;08
Ken LaCroix
That's really the nature with which I say it. And if you can find a way to be so efficient with marketing that you can spend 2 to 3%, and I think you can do this if you're very strategic, if you spend 12 to 15% in year one and year two, then you can maybe spend 10 or 9% in year three and four.

00;36;11;14 - 00;36;43;08
Ken LaCroix
And by year five, you might be able to get away with spending 5 or 4%. Those are all very different percentages. But for us to say it's going to be 10% every year sort of hides the the the hides the nature of always getting more efficient, always getting more effective, always getting more from from what you're doing. And I think, you know, marketing technology is changing so fast that I think you need to constantly be looking at what that marketplace looks like and what our marketing tech stack looks like, and, and what our marketing approach is.

00;36;43;08 - 00;36;45;29
Ken LaCroix
We think it needs to be much more often than nearly.

00;36;46;01 - 00;37;00;28
Craig Andrews
Yeah. Well, and one one thing Jack Walsh would say when he had, when people were coming to him with budgets, he's like, tell me what I'm he said, I'll give you as much budget as you want, as long as you tell me what I get in return for it.

00;37;01;00 - 00;37;03;23
Ken LaCroix
Exactly. Yep, yep.

00;37;03;26 - 00;37;07;27
Craig Andrews
Well, Ken, this has been a delight. How can people reach you?

00;37;08;00 - 00;37;21;27
Ken LaCroix
Our website and PayPal partners.com. There's all kinds of stuff there. You got some things you can download, get educated, get on our newsletter list. Happy to have a conversation with anybody about profitability. So you can tell I love talking about this stuff and I believe passionately in it.

00;37;22;00 - 00;37;38;23
Craig Andrews
Yeah, well, thanks for coming on Layers and Legacies. And I do hope people reach out to you because, you know, just like marketing, what you do is not an expense. It's a strategic investment. So thank you.

00;37;38;25 - 00;37;41;05
Ken LaCroix
Thank you.

00;37;41;05 - 00;38;10;03
Craig Andrews
This is Craig Andrews. I want to thank you for listening to the Leaders and Legacies podcast. We're looking for leaders to share how they're making the impact beyond themselves. If that's you, please go to Ally's for me.com/guest and sign up there. If you got something out of this interview, we would love you to share this episode on social media.

00;38;10;05 - 00;38;33;15
Craig Andrews
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00;38;33;17 - 00;40;43;29
Craig Andrews
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