The Business of Meetings 85: Understanding Your Business as an Investment with Greg Crabtree
Today, we are delighted to be speaking to one of the most solid and savvy people ever when it comes to finances and business!
Greg Crabtree is a partner at Carr, Riggs, and Ingram, and he is the author of Simple Numbers. Greg knows how to make accounting and cash-flow management very clear, easy to understand, and efficient.
He is joining us today to share his journey, discuss his views on what is happening in mergers and acquisitions (M & A), and explain what business owners should consider when looking at their finances.
We hope you gain a lot from today’s conversation with Greg Crabtree!
Greg Crabtree’s bio
Greg Crabtree is a speaker, author, entrepreneur, and financial expert. Crabtree has used his entrepreneurial skills to develop Crabtree, Rowe & Berger, PC, a CPA firm focused solely on the needs of entrepreneurs, helping them build the economic engine of their businesses. Working with entrepreneurs all over the country in a broad range of industries, Greg has simplified financial reporting and empowered all entrepreneurs to take ownership of their finances. He has pioneered a revolutionary metric for driving business profitability: measuring labor efficiency and developing simple benchmarks for company, team, and individual performance.
In 2011, Greg published his first book, Simple Numbers, Straight Talk, Big Profits, in which he shares his core principles of how to turn your business into a wealth-building engine. His second book, Simple Numbers 2.0, was released in November 2020.
Greg’s community service includes serving as Boys and Girls Clubs of America National Area Council Member, Entrepreneurs’ Organization Global Board (2006 to 2009), ALS Association of Alabama, Boys and Girls Clubs of North Alabama, Atlanta chapter of The Entrepreneurs’ Organization (EO) past board member. He is a frequent speaker at EO Chapter events, EO’s Accelerator Money Day program, and the U.S. State Department’s New Beginnings program for international entrepreneurs.
Greg and his wife Debbie have four children. Greg is an avid golfer and enjoys playing historic golf courses whenever his travel plans permit.
How Greg became an entrepreneur
Greg grew up on a chicken farm in Alabama. After going to college and getting a degree in accounting, he started in the profession and realized that he hated accounting.
He got a job as a controller in a bank but soon got bored with working with the figures for just one company. So he started his practice and worked with several startup businesses in the late 1990s and early 2000s. One of his clients moved to Atlanta and invited him to see what was happening with the Young Entrepreneurs Organization. Greg signed up with the organization after attending his first meeting. He did not miss a single forum meeting for the next eleven years, even though he had to drive for four hours to get to them! That broke him away from the traditional mindset. It also forced him to look at his practice as an entrepreneur and not as a practitioner.
Entrepreneurs Organization
Greg joined the Entrepreneurs Organization (EO) in 2001. He found that being part of a business group and community of entrepreneurs, all trying to get somewhere, was invaluable and a great leadership experience!
A record
For about fifteen years, Greg held the record for the two years with the most cash sponsorship received by the chapter of EO.
Breaking the chains of practice
That record led to Greg getting onto the standing finance committee for the global board of EO the next year. That broke him away from the chains of practice and gave him the confidence to leave town and broaden his horizons.
Ideas
Coming up with ideas to help entrepreneurs has allowed Greg to have a unique practice with clients across the US.
Greg Crabtree’s books
After helping entrepreneurs with his ideas, Greg gave several talks on the topic and turned that into his first book. He then gave a few more talks and wrote his second book. Fifteen years later, he became known as a successful writer.
A better conceptual framework
Verne Arnish and Ron Hollis, the man who got Greg into EO, encouraged Greg to write his first book, Simple Numbers, Straight Talk, Big Profits. They told him that if he knew something unique, he owed it to the world to write a book. Greg knew something that he felt everybody needed to know about the poor way that most accountants tend to serve entrepreneurs. He had a better conceptual framework for how entrepreneurs and accountants should work together and how data should be used to run a successful business.
Finding the truth
Greg has been looking for the financial truth number that professional standards do not create.
A different mindset
Greg became frustrated with the financial damage he saw entrepreneurs doing to their businesses. He realized that entrepreneurs needed to develop the mindset of understanding their businesses as investments.
Return on invested capital
Greg believes that any business in a developed economy should get a minimum return of fifty percent on invested capital.
Flipping things around
Greg’s business reached the point where they had more barriers to building the traditional parts of the practice than the consulting part. So, they flipped things around to make the most important part of their business helping their clients run successful businesses.
Merging
After merging in the professional world, there is generally a buy-out at some point. Greg was not ready to consider retiring, so he felt that merging his business would create financial stability for his family and give him access to more resources.
M&A projects
Greg probably has more clients in the middle of M&A projects now than he has ever had before. He has created a replacement return decision analysis to calculate whether or not a sale is viable.
Greg’s rule of thumb
His rule of thumb is that fifteen percent or lower should be the replacement return that gives the green light for a sale. If it takes more than fifteen percent to get the replacement return, you are probably not getting enough.
Opportunities
There are a lot of opportunities coming up right now for entrepreneurs in America.
A valuation technique
Greg created a simple valuation technique for businesses that he calls The Economic Value of the Business: 3 x net income + equity.
A good idea
When you are getting fifty to a hundred percent return on your invested capital, it might be a good idea to purchase several highly profitable businesses and use the profit from those to invest in other things, like real estate.
Scaling
With most of Greg’s clients, it is execution rather than the cash that keeps them from growing. Greg built his playbook around getting his clients profitable and cash-flow positive for a growth profile before they scale.
The top three things you can do to implement the best practices in your business:
- Understand your profit engine (How you generate margin.)
- Look at the operating expenses of your management structure. (Is your management-labor performing?)
- Understand the concept of trade capital. (Strive to get your trade capital down and your profitability up to become a cash-flow positive generating scaling business.)
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Connect with Greg Crabtree
Email Greg at greg.crabtree@cricpa.com
Greg’s book Website
Book mentioned:
E-Myth by Michael Gerber