Darrell Mullis, CEO of MetaMark Learning, joins us in a National Advisor Showcase segment to talk about financial education for executives.
Please excuse any typos in this hasty transcript.
Matt Register: Welcome back to the show. Texas Business Radio. TexasBusinessRadio.com is the website. See the entire broadcast in beautiful high definition video right there from the website. You could also get your questions in for there … Or call 844-814-8144 is our 24 hour call in line. 24 hours. That means call now. Call later. Call in the middle of the night. I don’t really have an opinion on it. We’re gonna get the experts on here to get those questions answered. I’m your host, Matt Register. Jay Curry’s normally over there in the cohost chair. He stepped out for a minute.
He’s gonna join us here shortly, but in the meantime we have a national advisor showcase segment. If you’ve listened to this show for any length of time, you know that there are speakers that come in to talk to CEOs from all over the country. They have a wealth of information to share with you about growing your business and this one is no different. Darrell Mullis is the guru behind MetaMark Learning. I can’t count how many successful business leaders I have met that do not understand financial statements. Well, guess what. Darrell has a solution for you. Darrell, welcome to the show.
Darrell Mullis: Thank you, glad to be here.
Matt Register: So tell me about MetaMark Learning. What do you do? Who do you do it to?
Darrell Mullis: Well, the main thing that we do is we teach owners of companies, executive teams, key managers and staff how to read and understand financial statements and use them to improve their ability to make good strategic decisions.
Matt Register: Like I said, as an investment banker, I cannot count how many even relatively successful business owners I’ve met that don’t understand. The financial statements are an afterthought. They put it together to get the bank off their back. It’s not something they use as a measurement tool, as a strategic decision making tool. I’m assuming you’re seeing the same thing, right?
Darrell Mullis: Yes, and don’t you think it’s interesting that financial statements are over 600 years old. The balance sheet was the first one created and it’s 600 years old. The income statement shortly thereafter. Even though it’s that old and such a basic form of understanding your company, most executives do not fully understand how they work. I would say it’s mostly because they’ve been poorly taught.
Matt Register: Well, and in fairness, you start a business because about and you’re very good at something, right?
Darrell Mullis: Yes, that’s right.
Matt Register: Then all of a sudden you find yourself in a position of where you were doing more billing, collecting, financial statement type stuff and not doing what it is that got you in the business in the first place. Sometimes that education component that teaches you some of those tools is missing. This is where you guys come in, right?
Darrell Mullis: That’s right. You’re right, a lot of people got into something because they’re passionate about it and they weren’t that passionate about the financial aspects and they don’t know how they work.
Matt Register: In fact I don’t know many people that are passionate about … Maybe you might may be the exception of that, right?
Darrell Mullis: Well, one of the problems with it is it’s always been considered kind of a dull, boring topic, and so one of the things that I … Customers hire me because I make them a promise. The promise is I can make it fun and easy to learn finance and that’s what we try to do.
Matt Register: Well, God bless America, that is sorely needed in the business world. Talk to me about who it is you actually do this for. It’s not only business owners but it’s some bigger company guys as well, right?
Darrell Mullis: Yes. I’ve worked for companies from a million dollars in revenue to 40 billion, so I’ve worked with all sizes from the CEO down to even front line employees. I’ve done programs for people who worked in a food factory who came to my class in a hairnet just so that they understood how their job related to the company making money.
Matt Register: Well quite often with bigger companies, what they run into is all the sudden somebody that is good at a line level job all of the sudden is promoted to the point that they have responsibilities they don’t necessarily have the education to match. Is that accurate?
Darrell Mullis: That’s right. At AVB I was mostly teaching their engineers and engineers know nothing about finance.
Matt Register: Sure.
Darrell Mullis: So I was trying to help them understand how what they do relates to the financial statements. Most of them … They don’t really understand it at all so they need to have it taught in a very simple, clear way. The thing that we do that’s unique is we turn it into literally a game or a physical activity and the physical activity … If you think about it, the financial statements are scorecards and they keep track of how you’re performing, right?
Matt Register: Sure.
Darrell Mullis: So, the scorecards, like in sports, the score is related to the activity, right?
Matt Register: Sure.
Darrell Mullis: You run a football game and the score keeps track of the activity. So, what’s the practical way to teach people how to understand the scorecards of a business? Simulate the actual activity of the business, and so that’s what I do. I create an activity where the participants are literally running a company and what that means is they’re going through typical business transactions. As they go through the transactions, they’re literally building the statement, so I’m not showing them statements trying to explain something to them. I’m having them understand how the statements get put together, what the principles of finance are that create them and then how they then see how what they do in their company relates to all three, the balance sheet, the cash statement and the income statement.
Matt Register: Interesting stuff. We’re talking to Darrell Mullis with MetaMark Learning out of Boulder, Colorado here in Texas teaching CEOs about understanding their financial statements. The second part of it is once they understand and can read the financial statements is how do they translate that into decision? Into actual business decisions, right?
Darrell Mullis: That’s right, and to do that, what you really need to know is what are the key measures that the financial statements show you. I believe any company is successful when it does two things really well, and one is it’s got to be effective and the second, it’s got to be efficient. Effectiveness is really the owners and CEO function. That means we’re effective in getting people to recognize who we are. We’ve designed who we are. We’ve created a model. We know who we are. We know what we’re selling. We know what we’re charging for it. We know whether we’re local, regional, national, global. All of the major things about a company that gets people to know it and understand it and trust.
Matt Register: Yeah, we’ve got the right products, with the right customers and in the right places.
Darrell Mullis: Right, that’s effectiveness.
Matt Register: Yep.
Darrell Mullis: Efficiency … If you’re effective, what you do is you generate revenue.
Matt Register: Sure.
Darrell Mullis: You get people to vote for your company with their dollars.
Matt Register: Sure.
Darrell Mullis: So efficiency, then, comes from how well you manage that.
Matt Register: Yeah, how feel dollars should it cost you to be able to generate that revenue?
Darrell Mullis: That’s right, because as soon as you’ve got revenue, your goal is to turn that into profit. That’s efficiency. How well can we run our operation to minimize cost, to make more money? Look, there’s three ways to make money, sell more, charge more and manage your revenue efficiently so that you save money.
Matt Register: Yeah, become more profitable.
Darrell Mullis: Right. All those are the three ways … Now, the most effective, the quickest way to make more money is to charge more, but you can’t always do that, so you’ve got to sell more and you’ve got to manage it more efficiently and then once you’ve got more profit, the second piece of efficiency is how quickly and effectively can you turn profit to cash? So, those are the two efficiency metrics. Profitability and I call it … The number one measure for that is return on sales. How many dollars of profit am I making per dollar of sales? Then with cash, cash return on sales? How many dollars of operating cash flow is my company generating per dollar of revenue? Those are the two key efficiency measures.
Matt Register: Well, it’s interesting. As an investment banker, cash is the one thing that I see that most business owners don’t have a full understanding of, is how their cash flows through their business, how sometimes when it’s counterintuitive when business goes up and cash is tight, right? When that working capital is growing, how do they manage through that? Otherwise growth kills you, correct?
Darrell Mullis: That’s right, and one of the things that business owners really don’t understand is that not only do they need cash, they need to make sure the cash has been generated from operations. I could have a business that owns a building and I could sell it and make a million dollars of profit. Well, I could have a lot of cash, but if that’s not being generated by the operation, I’m not really being successful.
Matt Register: Yeah, you don’t want to trick yourself into thinking selling assets is the same as selling product and being profitable with the product, right?
Darrell Mullis: Right, at the turn of the century, we had the dot coms and they all went bankrupt, right? Well, why did they go bankrupt? They weren’t generating cash from their operation. They didn’t even generate an operation, so they got a bunch of cash from investors and once they ran out of that finance cash, they went bankrupt.
Matt Register: Yep, no doubt. Darrell Mullis, MetaMark Learning. MetaMarkLearning.com is the website. We’re gonna have it linked right there from TexasBusinessRadio.com. Thank you very much for joining us.
Darrell Mullis: Thank you.
Matt Register: We’ve got to go pay some of our own bills though. We’ll be back right on the other side of the break with more Texas Business Radio.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.