Dear Reader,
It’s been 216 days since I last wore colours to work. I’ll stop updating you about this since it’s going to be my uniform for some time to come (I’ll be unpacking this over my next two monthly letters).
Have you ever been in a hurry to get bad news? Like, you know it’s going to hurt, but you can’t wait to hear it nonetheless. I’ve been in that situation a lot recently, and this quarter’s financial situation is one of them. We knew it was a rough one, but boy oh boy.
To start, we had to make some cuts. Spaceman, our little department overseeing 1025 Pandora Ave, is now unmanned. Ryan Sawatsky, serial entrepreneur and long-time friend, is off the hook from cleaning the Roomba and dealing with plumbing messes. Blessed be Melissa who's taken over that role and shined immediately.
Melissa, my amazing assistant, has graciously accepted working 80% time until the next fiscal year starts in August.
Good Marketers Group, our apprenticeship program and would-be recruitment arm of Benifactor, has been shelved. April has agreed to work reduced hours and serve as Frontier’s HR leader and Francis’ assistant. There is tremendous value in Frontier having apprentices, but this isn’t our year.
Frontier has seen the departure of Jordan in Client Success, and Megan, David, and Tori have all agreed to work fewer hours. Frontier’s winter has been the focus of our financial fracas and while I’m sad our quarter fell so far below expectations, I’m in awe of the great team that has pulled up their socks and resolved to make 2020 our best year yet.
Finally, BKeeper, which only recently generated some buzz by adding new clients, has set forth a contingency of reduced summer hours to stay within the agreed upon budget limitations.
With the untimely demise of Black Mamba, Kobe Bryant, I thought I’d kick off this financial update with a quote from the man, and this one was simply incredible:
“Pain doesn’t tell you when you ought to stop. Pain is the little voice in your head that tries to hold you back because it knows if you continue, you will change.”
Our senior leaders know what I’m talking about, and I’ll expand more on this change next month. For now, I’ll share with you the pain that was quarter two.
In our fiscal 2019/2020 second quarter, the company posted quarterly revenue of $608 thousand, a decrease from $867 thousand the year-ago quarter. A couple of months ago I said Q2 will be much smaller year over year, but I didn’t think it would be a quarter million less.
For the first half of the year, our revenue is $38 thousand less than a year ago. This is unheard of for us. In fact, the most recent four quarters show that we’ve only grown by seven thousand year over year. Normally we grow by half a million per year.
News like this is why we have cuss words.
Ironically, cash-flow, my primary focus of the last while, has been great. We coordinated a new financing agreement with our major supplier and in the end we netted $87 thousand in cash this quarter, all while continuing to front load our expenses. Last year we had a net cash outflow of $24 thousand.
For the first half of the year we netted $205 thousand dollars in cash, compared to $93 thousand a year ago. In some ways I feel like saying “mission accomplished”, as this was a major focus of mine in the fall. We have front-loaded so many expenses that we’ve never had a clearer view of our profitability financial performance.
But, for the first time ever, we had a losing second quarter. Our ‘best’ months, November and December, were losers. We budgeted profitability of $59 thousand and ended losing about as much.
Where the cuss did we go wrong?
I’ll expand on this more in the next few months, and on how we’re responding and growing as a team. As mentioned above, we’ve had to get leaner. Now everyone is focused on growing revenue to match our size and abilities.
Frontier budgeted for significantly more clients than it currently has, and instead of growing towards a portfolio of 20 clients, we’re currently at 14. Back in June when I declared the 20/20/20 vision we had 16 clients and thought 18 was imminent. To say the least, that didn’t cussing go as planned.
We pre-hired in preparation for growth. Underlying this was a reliance on inefficient communications processes (which we’re correcting, more on that next month). We also didn’t anticipate the pain of our first winter in years without Mariam, Sophie, or Sarah (as a client success leader). Operating expenses shot up over $100 thousand in the first half of the year, while revenue went down $38 thousand. You don’t have to be a CPA to know that causes a real cuss up.
2020 has started off painful, both personally and professionally. I hope that I’ll have the opportunity in future months to tell you how it’s changed me, and this organization, for the better.
Sincerely,
Benjamin Johnson