What Vanreusel Ventures Cuts Before Sales and Marketing

0:00 · Who James Vanreusel is and the clients he serves

Jordan Lally:0:00
Welcome back to the High Ticket AI Systems podcast. Everyone, please welcome the one and only Mr. James Van Russell. James, how are you doing today, man? Welcome to the show.

James:0:01
Yeah.

James:0:04
Okay, I'll be checking.

James:0:09
I'm doing great. Thanks for having me on, George.

Jordan Lally:0:11
Absolutely, my man. It's our pleasure. Can you give the audience some quick context as to what the company does and who you guys serve serve best or who you guys help best?

James:0:21
Yeah, so so we're a corporate finance consultancy, which basically means that we help you scale your company using solid financial platforms and technology to to scale your systems. we work primarily with two kinds of companies. One is VC BEC companies, and then secondly with international nonprofits.

Jordan Lally:0:48
I feel like those are vastly different.

James:0:50
They they are, they are. But you know, they both have a mission. and yeah, that my you know, that's my background as well. I started off on working on Wall Street, and then I transitioned over into into social finance and and then I started this company about 12 years ago and kind of combined the two so that you know, it's not it's not just you know nonprofits, they can be for profits as well. but they they have a you know, it's purpose driven capital.

0:52 · Leaving Wall Street for microfinance and launching the firm

Jordan Lally:1:23
That total sense. Quick question before we dive in. what was the pivotal moment of leaving Wall Street to explore other avenues?

James:1:33
yeah, it was you know, j just this idea the last few years that I was working there that I wanted to to do something more. you know, like when you're on Wall Street, you're very you feel very pigeonholed. You're you're you're very much an expert in what you do. and that's great. but I was still young in my career. I was, you know, late twenties, early thirties, and just had this yeah, feeling of of wanting wanting to do more with with my skills and with finance. And so you know, the idea of something in social finance, you know, it turned out turned out that I went into microfinance, which is you know, operating these, you know, smaller banks that give small loans to primarily women, but sometimes men as well, to start their own businesses. you know, that's that's the way it went. But there there are many other ways to do it as well.

Jordan Lally:2:30
I'm gonna be really honest with you. For those of us that do not have a college education, studying finance is like a a foreign language to us. I mean, I say us, like there's millions of us, but we we learn math in school, but we don't learn the language of money. We don't learn finance. After being in business for six years, I realized how vitally important understanding money, understanding your books, understanding finance really is.

James:2:42
Yeah.

James:2:51
Yeah.

Jordan Lally:2:59
I I really want to focus this topic, this this topic conversation, if you don't mind. Just like principles, best practices, tips on how young founders, maybe like tech startups that just acquired their first seat of funding and what they can do to really optimize the books and how how we can use that balance sheet or just finance and actually scale the company. Would that be fun for you?

James:3:25
Yeah, no, that's that's that's good. Yeah, that's good. That's what that's a lot of what we do. so so I would, you know, I probably attack this from like, you know, the the there's two areas, right? There's the income and there's the expenses. And you want to make sure that the income is bigger than the expenses at the end of the day. and and you know, and the income can be, you know, are we fundraising or is it organic revenue?

And and you know, you're you're really l you know, when you when you're thinking about finance, right? If you're this you know, thinking about it from the CEO's perspective, the founder, right? They don't want to get into like day-to-day bookkeeping. So so what are they really looking at? Right. So so they're really looking at, you know, you're you're somebody told me, you know, you're looking at three things really. You're you're making sure you're not running out of cash, you're building a great exec team. and and I forget the third one, but it but it's really just like How do you elevate yourself above the minutiae? And I think, you know, and the th the third one has to do with like raising money, you know, and not getting involved at smaller dollar levels. And so, when when it comes to to the cash, you're really thinking about, okay, you know, we need to get go to market traction, right? That that, you know, and you're raising money to get to that point, right? That's that's number one.

The second one is the expenses. So how you know, the the idea of a budget is really, you know, the budget is a plan as to how you're going to allocate your resources to reach your goals. So first you have to set your goals, which is what the CEO does, and then you know, creates the vision and the goals. And then the budget is really is really telling you how am I going to spend the money to achieve the goals. and you and what happens a lot is that the expenses get bloated very quickly.

And so every every quarter, I always say, you know, everything's on the chopping block. You should be look you know, what I what I've done, and I know we talked a little bit about AI as well, and AI is kind of creeping into everything is, and I do this every month with my personal expenses as well, is you know, you you you know, you just open a chat window and you start, you know, you upload all your your statements and everything in there, and then you just start working. Hey, what do you think?

3:57 · Balancing income versus expenses and using AI to trim budgets

James:5:52
You know, we use Claude. What do you think, Claude? You know, where can we and and after a while, after a few months, you just create a skill and then it cre it keeps updating it. And so the idea is that you're you're really thinking about do we do we need this? Right. Six months ago we did, do we need it today? Because if you can spend if you can save a thousand dollars here, then you can spend it somewhere else, it's gonna drive you forward. And and you know, th those are kind of the main things.

The bread and butter, of course, is like you've got to close your books every month because you need to know where you are. you gotta you gotta figure out kind of your North Star KPI that if you know if that goes well, company's doing well. and and and that's usually a weekly thing. So something that you look at, you know, every week. and so you know, you close your books, you have your reports.

You look at budget versus actuals to make sure you're not overspending. and and then and then you have these, you know, the unit economics. So you know, how much does it cost? You know, it can be anything. How much does it cost to get to acquire a new customer? Right? How much does it cost for me to treat a patient? How much does it cost for you know, cost per patient, cost per customer, cost per something? Right. And that's that's also how you build your goals. I want to reach a thousand customers. costs me five dollars a customer, that's five thousand, you know, and and that's how you build your budget and your plan. And and you know, there's kind of a feedback loop between setting the goal, what's it gonna cost me, understanding the cost, and then going back to the goal and saying like, that's too low or that's too high and readjusting it to to make sense.

Jordan Lally:7:42
Thank you for for all the valuable information. I I I wanna go two directions here. One is when you are working with clients and they're not going towards the North Star and they're just, I don't know, either stagnant or hopefully not the case, but like declining, losing revenue, hemorrhaging cash. What do you feel like is the one of the first things we should look at that we should cut? Is it marketing and sales operations or like trying to drive new business revenue or is it something else?

8:13 · What to cut first when a startup is losing revenue

James:8:15
so so yeah. So so to ask me the question again.

Jordan Lally:8:21
For sure. If a company's hemorrhaging cash, right, we have goal to get a thousand clients. Each client is about five dollars, okay? And we're clearly off pace. Like we are we're overspending in X category. I don't know what that category is, and we're just not moving up and to the right. Typically, from your experience, what should we cut in order to not like bankrupt the business or like continue to lose cash?

James:8:37
It may

James:8:43
Yeah.

James:8:49
Yeah. Yeah. So so so I so I so I yeah, I talk about two things. So one is kind of the there's the VC backed one where they're always losing money, right? And then there's the bootstrapped company where you where you should be profitable, right? So if you so if you talk about the the VC backed one where it's really a market share grab and you're trying to

Jordan Lally:8:54
Is that still kind of like

James:9:17
you know, establish yourself, you still want you know, you you still have have constraints, right? And and you don't, you know, and maybe you just raise your series A, you you know, you know you've got 20 months of runway, and all of a sudden, six months in, you're, you know, instead of 14 months now, you've got like nine months, and you're like, whoa, what happened? I mean, you should know ahead of that, but it's like, hey, what happened here? This is like something like Something's not working. Like maybe you're spending in line with what you thought, but the revenues just aren't coming in. you know, I I the I think that's that's where a lot the power of finance I feel like comes in, because you're predicting, right? And and you want to get the early warning signal as early as possible. and and listen to it. Cause sometimes the warning signal's there and no one listens.

But but the question about where do you want to cut, I think you know, a lot of people cut their marketing and all kinds of stuff. in my experience, if you cut the marketing and the sales, it takes a long time to re-engage it. Right? It can take up to three to six months easily to to restart it. And so if that's you know super important, I I would probably look to minimize as much elsewhere. Be, you know.

Like you gotta minimize the overhead somehow and and you know, maybe take some shortcuts if needed, in that area. I would look at, you know, just just the team, right? Like the biggest expense is usually people. So can we cut, you know, do we need to cut people? Do we need to furlough? Do we need to what can we do here? Is the team too rich? Are they are there underperformers?

You know, that that might be the place to look. And then and then also just looking at all your vendors and consultants and contractors and you know, are they really giving me the value that I need? b yeah, be because you know, you might have a marketing consultant and there's just not enough traction. You know, like maybe, you know, may maybe the money spent there is good, but maybe we need a different person to spend it on. Right. So so lots of different questions.

James:11:40
And that kind of ties back to the bootstrapped one, but the bootstrapped w example is slightly different because for them, you really, you know, you you want them to be able to sleep at night, right? And for that to happen, you gotta be profitable. Right. And and and so and so I feel like with bootstrapped, like you don't have these investors hounding you. And you got you don't have to report to them. You're really reporting to yourself in a way.

Jordan Lally:11:56
Hm, yeah.

James:12:10
And and so you just have to say, look, like my revenues have dipped. Let's say you you you know you have a million in revenue a year, revenues have dipped by twenty percent and my expenses are the same, I gotta cut expenses. And it's you know, and the first time you do that is extremely painful. And you might need someone to hold your hand, right? And like a coach or something be like, this is painful, like how like If I if I lay lay these two people off, like what am I gonna do? It's too much work, I'm gonna be swamped, I can't get new business. But but but you gotta get, you know, you gotta get the the the expenses to align with the income. And usually what happens is, you know, you know, you you're you're gonna shrink, but you're gonna come back stronger. Right. And and and maybe three, four years from now, something similar is gonna happen because it's like a stock price, right? It goes up and down and up and down.

Right. And your business does that. And so, you know, when you're at the downs, can you still survive? Which I think is why the gig economy is so good because your payroll's got a minimum level to it. And you want to make sure that the lowest low can still pay your payroll. Right. And then everybody else, the growth is kind of fed with contractors until you go to the next level where you can hire W twos.

But but yeah, you you just you you know you gotta you you you just need to be able to be agile. It's kind of like agile budgeting, right? When you when you you know, when you approve the budget at in December for the year, right? Do you already have a plan of if this doesn't hap like my growth is conditional upon these things, if we sell this much, it it unlocks spending.

But it but if you know if the income doesn't come through, there are like two or three risky areas during the year. If we miss those, then here are the two or three things that we can cut. And kind of knowing it in advance is is really good. And I think, you know, the first time you have to cut is is so painful and strange and new to people. But once you've done it once, the second time's easier, the third time's easier. yeah.

Jordan Lally:14:32
Absolut it's like practice or like just having that under your belt, like the repetition of it is it is a tragic thing to lay people off. I you know, I I'm sure everyone probably has done at least once or if like no one encourages it, but it's just part of business and it does. I I I had to recently. But I I'm really curious about the venture backed. I imagine typically it's tech, B2B software.

Yeah. I like because it's I know nothing about that world. I mean obviously like it's very fascinating to me. And I and I really want to understand like how finance like you said, finance is really important in these specific situations. How how does that look from your perspective, like on a weekly, weekly or a monthly basis, you know? what is I guess your goal, your role, your your your your North Star in that specific role? Hopefully that makes sense.

15:03 · Tracking runway and key financial metrics for VC backed startups

James:15:28
Yeah. Yeah. I you know, I I would say, you know, there's usually a few, you know, there's one North Star, but there's there's there's like a dashboard that you're really looking at, which is, you know, like I said before, dollar amount of cash, months of runway, you know, total revenue, you know, gross margin. and and it and it's you know, it's those kind of growth metrics that you're focusing on. you know, you need you need to understand.

Like, you know, you might have eighteen months of cash flow, but it takes nine months to raise money. So so, you know, what what's your real runway before you have to find more money? Right? It might it might only be like nine to twelve months because you don't want to raise money when you've got three months left. Cause one one, you might not raise it and two, you know, the anchor investor that that's gonna give you the money knows that you need the money and they're gonna give you a bad deal.

Jordan Lally:16:25
Yeah.

James:16:27
Right. So so yeah. So so so there's that consideration. there's the watching the expenses is is important, but I but I think you know I think the CEO is really focused on the growth, right? The commercial sales, you know, who's on the team talking to investors, you know, the monthly reporting, the the quarterly board meeting, you know. kind of always always always be prepping for the next round of fundraising, you know, also understanding if our model works out, then you know, we can break e we can break even in four years. Right. And if we break even like you know like how much cash are we gonna lose? How much cash do we need to raise? So if if today we raised, you know, 40 million dollars, okay, like if we had 40 million we can get to break even in four years. Like we wouldn't have to raise anything else, but no one's gonna do that because the valuation's lower today. So they wanna raise it over time as the valuation grows. So they don't have to give up as much percentage of the company that they own.

Jordan Lally:17:44
Do you help in that process? Raising or and stuff like that?

James:17:49
Yeah, yeah, we yeah, we help. So so there's yeah, there's two types of help. The the there's the you know, we make sure that the books are in order, they're US GAAP compliant, you know, they they would pass a quality of earnings inspection, the models there, you know, it's it's you know, the data room is ready. and and we can talk to the investors that are interested to to to give them answers. That's one area. The other area is you know, some firms we don't necessarily do this is go out and find investors, right? And that's more of an investment bank brokerage that would do that. and sometimes organizations will hire those types of companies. but but they're pretty expensive. And usually the CEO has to, you know, they're the ones pitching anyway. They don't want s some third party pitching, right?

18:15 · How Vanreusel Ventures prepares founders for fundraising rounds

Jordan Lally:18:45
Yeah. Nobody can sell the story like the founder of the CEO.

James:18:49
Yeah. And it's still you're still betting on the team, right? You're betting on the founders, the team. you know, as as the company grows, you're looking at systems and processes and everything, right? But it's still like you still want to have the right team.

Jordan Lally:19:05
Speaking of team, I want to ask you from your personal experience, what what are some quality traits or characteristic traits of like this founder? I like this guy, he has grit, I see the vision, I I want to partner up with him and like help him scale the company versus another founder where it's like, this guy sucks. Like how how the hell is he even this far? And I'm being really general here, but hopefully you can, you know, paint the picture. Wha what are those quality traits do you find in in very successful, good?

James:19:28
Yeah, yeah.

Jordan Lally:19:34
Founders and CEOs versus not so much.

James:19:37
Yeah. yeah. The you know, the one thing that I've told people that I have found, like if you Google it, it's not gonna show up, right? is and and this is with clients that I work with, the the CEOs that are really good at finance, right? They might have a CPA or something, they're usually really good because they understand the numbers.

Jordan Lally:19:48
Mm-hmm.

20:08 · The unique traits of successful founders and working capital mistakes

James:20:08
They're real you know, they they're the ones who get it. it could be a lawyer as well. You don't see, you know, you don't see a lot of CPAs and lawyers as like, you know, founders and you know, but usually they're real, you know, I have found them to be really good. you know, the other traits of course are, you know, are you coachable? Are you, you know, willing to pivot? Are you, you know, all those things. but yeah, that's kind of kind of the off the books. thing that I've seen. you know and yeah. And then and then there's also, you know, the right, the second or third founder. Like some some VCs only invest only want to invest in a second or third, you know, founder. and and the reason is they've just gone through it all, right? They've seen the good, the bad, the ugly, you know, they they've laid people off, right? Like, you know, it's it's really hard to lay people off.

Jordan Lally:20:40
That's interesting.

James:21:06
And you know, and having done it will make you more nimble. Yeah.

Jordan Lally:21:15
So there's this guy, there's this purple book behind me. he's big in like the online information space. Are you do you know the name Alex Hermozzi?

James:21:25
I'm not, no.

Jordan Lally:21:26
Okay, no worries. Everyone, not everyone, but like people in the info high ticket product space or high ticket service space, they they view him as like the of just a legend. I bring him up because he's a freaking finance guy. Like if you listen to what he like the way he articulates himself, how he was able to scale, you know, a company to forty forty million and sell it and like now he's in private equity. But the way he really explains business.

James:21:30
I think that's

Jordan Lally:21:54
And how he's able to achieve success on behalf of his own companies and others, you know, people companies he he invests in, is it's like it's just math. Like business really is just math. You know, and I'm beating myself up because I love math at school. But as like an adult now, I I really feel like I have to get back into that. Like I'll be fully transparent with that, but I am not the best with my finances when it comes to the books and even personal expenses. So I'm like

James:22:03
But this really is obviously I'm looking at

Jordan Lally:22:24
Damn, I really I really have to get better with this. Like go back to go back to the basics if that makes sense. You know, and I'm sure other people are kind of the same say say same as I'm not that low look.

James:22:30
Yeah.

James:22:35
Yeah. Yeah, you know, you know, it's it's I mean I I was a math major. and and like like that level of math is so far beyond what you need in the real world, right? you're you know, it's really not that complicated, right? Even even like you know, profit and loss statements and like you're just you you're adding and subtracting and like multiplication, like in in in essence. you know, and and some things are really complex. Like I I find taxes really comp can be really complicated, right? When you when you do like MA and stuff, it can get ridiculously complicated. And so you need like specialists to work with. you know, but but I but I feel like for for you know anybody who's listening who's like, you know, I'm running my own company, you know, I'm like, I'm okay with the financials. I'm you know.

You can hire like a fractional CFO for a reasonable amount of money on an hourly basis, right? And and don't ask them to close the books, don't ask you know, but just just say, Hey, I want to sit down with you like one hour every two weeks and I want to go through stuff and I want you to teach me. Right. You know, let's let's look at my working capital A A P, which I you know, I find is pro i it nobody teaches it. Right. You can go to business school, you can go to co you know, like nobody teaches it because it's so simple. But it's the number one thing that that makes I think makes companies go out of business. Right. It's like you're just not collecting enough money and you're paying too much. and and you know it can be like you just get you know you get bad debt and it's like wow that was that was a cost for you know price of business school right there. One one client that didn't pay me. and and yeah like you know they they they're out there and and you know you can yeah you can you can learn a lot just just the simple stuff. It doesn't have to be super complex.

Jordan Lally:24:52
For sure. With you know high-ticket AI systems, that's the name of the podcast, are is your company adopting or integrating AI systems or AI workflows into what your consultancy does?

James:25:08
Yeah, so we so we're doing both trying to do both internally and externally. in internally, because we're trying, you know, we're trying to test it out internally first. right. We don't want to test it on on our clients. Yeah. You know, so so we're trying you know, on the one hand we're we're trying to use it with with our monthly close. Like how do we get to like a zero day close?

Jordan Lally:25:18
Exactly. Yeah, yeah, yeah.

What the hell is this? This is broken.

25:23 · How Vanreusel Ventures integrates AI tools into financial workflows

James:25:35
You know, which basically means you're doing everything like the week before and it's all automated and so we're we're trying to do that. and and we use the regular softwares like the tech stack that most startups and small businesses use. and and we use Claude ex extensively. you know, we we've created a lot of skills for that. so that's on the close, on the modeling. we you we you know we primarily use something called shortcut.ai, that's also based on LLMs. It's it's Excel based. you know, it does a better job than Claude on models, you know, and that's brought out you know, maybe it took fifteen to twenty hours to build a model, now it's like four to five. so so we use that a lot, you know, and and then we use for like business development proposal writing.

You know, it can be anything. We're just trying to create skills so that you know we we can we can upload notes and documents, recordings, s you know, and and it just does it all. So you're you're you're basically creating workflows that are you know, like the on the proposal side, you know, you'd have a BD call that's you know that gets recorded, it automatically flows into Claude.

Claude automatically, you know, transcribes it, uses, you know, the proposal skill, and then creates the initial proposal to review. And so and so you've done nothing but have a 30-minute BD call, and then all of a sudden, five minutes later, there's a proposal in your inbox to review. Right? Kind of stuff like that that's productivity enhancing. You know, the one thing that I mean people talk about all the time is, you know, you you have to have somebody who knows what they're looking at to review it. Cause because you know, you could you can do legal stuff, you can do other stuff, but at the end of the day, it, you know, I feel way more comfortable having a a corporate attorney review stuff than than than me. Right. especially if it's if it's high stakes. If it's just like, I kind of know this, it's not a big deal. You can save some money, but the high stakes complex stuff, you gotta have somebody, you know, there

James:28:00
Law firms use this stuff extensively now, right? But but they still know what they're looking at.

Jordan Lally:28:06
Exactly. They're the experts, so they they can say that's bad is good. I'm like yeah, I'm I'm not an attorney by any means. I I did have a question. This actually just came to came to my came to mind. You're out there in San Francisco, correct? And you work with venture backed companies. You're like in the heart of the space. Was that by accident? Or did you realize I want to work with these types of companies so I'm moving to San Francisco? Or I live in San Francisco now, let me work with these types of companies. I haven't

James:28:08
Yeah. Yeah.

James:28:18
Yeah.

Is that by an accident?

James:28:33
Yeah. it was a little bit of both. So so I I I got married and moved out here 'cause my my wife got matched at UCSF. the the the hospital here. She's a she's a pediatrician. and you know, I I I lived here for about a year, many years earlier, and I kind I knew some people, so it was like, yeah, I kinda you know I I know some people, I know what's going on. you know, it's all tech. And so so, you know, when we were talking about where she might get matched, you know, I already knew San Francisco would be, you know, one of the top cities on my list. so so yeah, so it's a little bit of both. It's like, you know, I came here for for her work, but I knew it would be good for my work too.

Jordan Lally:29:24
That's amazing. That's awesome, my man. James, what is next for Q4 going into 2027 for you and the consultancy?

James:29:34
Yeah, I mean a couple of things. So we we just hired a senior controller to head up our accounting practice. So so we're we're we're growing that area a lot. that's one. the second one is you know, we wanna start offering these AI services. so it's not just, you know, regular fight financial services that you're offering, but really saying, Hey, you know, we're gonna you know, we're gonna go in and we're gonna try to get your clothes from 15 days down to three. Right. And how is that going to happen from, you know, people that are in the weeds and and doing it. We're not, you know, we're not, we're not you know, technical founders. We're not, you know, engineers, you know, we're finance people. and and then you know, the the third thing and you know, maybe this is maybe this is Q1 or or something like that. but we wanna, you know, We're already scaling companies towards an exit, like that's the goal. but we want to get more involved with the the transactional side of of and A.

29:55 · Scaling the consultancy into Q4 and expanding M and A services

Jordan Lally:30:43
Interesting. I thought that would be a pretty strategic move. James, thank you for all the the nuggets, the tips, the strategies, the best practices. I learned a lot. One of the reasons why we invited you on, it was a purely selfish reason. I wanted to know more about finance and you enlightened me. You gave me what I was looking for. Thank thank you for joining us.

James:30:44
Yeah.

James:31:02
Okay. You're welcome. Yeah, it was a it was a pleasure talking.

Jordan Lally:31:05
Yes, sir. Audience, until next time.