Ep. 194 — Pat Hobby: Bank Balance Accounting Isn't Going to Cut It Anymore

6 min read

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Episode Summary

You’re staring at your bank balance, your line is creeping up, and you don’t know if you’re three weeks or three quarters from real trouble. That was the conversation I was having with damn near every owner in the spring of 2020, and it’s why I brought my business partner Pat Hobby on. Pat has decades as a CFO. Together we’ve watched what separates the owners who use a shock to acquire, double down, or de-risk from the ones who just hunker down and hope. The gap isn’t grit. It’s clarity. Specifically: a 13-week cash flow that gets revised every week, a revised annual budget built on all three statements (not just a P&L), and a five-year view that turns the next quarter into a stepping stone instead of the whole horizon. We walk through how to get clear on cash, how to get intentional about the value you’re building, and how to get going on a rhythm that actually compounds. The throughline lands on the same place every iBD owner ends up: your business is an asset, and your Three-Statement Model is how you read it.

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## Top 10 Takeaways
  1. Bank balance accounting (how much you made last month plus what’s in the account) won’t tell you if you’re three weeks from trouble.
  2. The 13-week cash flow is the foundation, revised every week, because clarity beats hope every quarter.
  3. An income statement budget without a balance sheet projection is fiction the moment growth consumes capital.
  4. Your three statements move as a closed loop, and every operating decision ripples through all of them.
  5. Don’t blindly grow and don’t blindly take on debt. Twelve years of that just ended.
  6. Shift your mindset from “what can I take home this year” to “what is this asset worth in five.”
  7. Write down what you want, your financial targets, and your exit options before you pick a single strategy.
  8. Get a business valuation. It’s not about selling. It’s the starting line for every decision after it.
  9. De-risk the cash flow (sustainable, predictable, transferable) and the multiple takes care of itself.
  10. A strategic plan that never lands in your financials is a wish. Model the choices or they don’t count.

Sound Bites

“A lot of business owners, they look and see how much money they made last month and how much cash is in the bank account. Bank balance accounting, right? That may be the extent of their financial analysis. That’s not good enough anymore.” (@TBD) — Pat Hobby

“Don’t just look at top line revenue for the next two, three years. Don’t just blindly grow, blindly take out debt. There was 12 years of that, quit doing it.” (@TBD) — Ryan Tansom

“Sustainable, predictable and transferable cash flow. The less risky your cash flow is, the more valuable your business is.” (@TBD) — Pat Hobby

“Financials are the language of business. A lot of business owners don’t want to dwell on them or analyze them. But man, that’s how you understand in a significant way how valuable a business is.” (@TBD) — Pat Hobby

“It gives you choices and freedom, period. Choices and freedom. Period.” (@TBD) — Pat Hobby

About This Episode

Pat Hobby is Ryan’s business partner at Arkona and a veteran CFO with decades of experience guiding owner-operated businesses through growth, downturns, and transitions. This episode was recorded in April 2020, in the early weeks of the COVID shock, when most owners Ryan was talking to were trying to figure out whether they were three weeks or three quarters from real trouble. Pat brings the financial discipline and Ryan brings the ownership lens to walk through the three-step sequence: get clear, get intentional, get going. The episode also previews the digital “Mastering Your Cash Flow” mini-course Ryan and Pat built to package the 13-week cash flow template and the ground-up budget build for owners who wanted to do this work themselves.

Resources Mentioned

  • Mastering Your Cash Flow Digital Course ($95) — Seven videos on the 13-week cash flow statement plus ~10 videos on building a budget from the ground up with all three statements, including the dynamic template.
  • Intentional Growth Digital Course — Five-and-a-half hours, 36 videos covering the five intentional growth principles from the live bootcamp.
  • Arkona Growth & Exit Bootcamp — Two-day live event on the five growth and exit principles and the world of M&A (referenced as the sponsor).
  • EOS (Entrepreneurial Operating System) — Referenced as one of the operating systems Ryan recommends for the weekly/monthly/quarterly/annual rhythm.
  • Ep. with Jeff Sands on turnaround — Referenced for the 13-week cash flow conversation in a distressed context.

Connections

Phase + Module:

Milestones inside Sustainable Financials and Ownership Goals:

Concepts referenced:

Graph View