entrepreneur – The Frustrated CFO

Newsflash: GOP Begs Obama for Tax Cuts via Radio? Seriously?

Dear readers! We interrupt our previously scheduled postings for a series of very special announcements:

Radio waves are the last political resort.

Apparently all other political channels are either broken or backed up by "more important" problems. This passed Saturday, frustrated by the House/Senate stalemate, GOP asked Obama to keep Bush tax cuts intact via their radio address. Is that what's going to work? What is this the 1920s and everyone is glued to their Radiolas?

Clearly, the issue that affects not just the monetary policies of this country, but also "minor" sociopolitical concerns such as, for example, the economic principles of true capitalism and definitions of social classes, cannot be successfully discussed in the policy-making branches of our government – the partisanism overpowers the reason. So, the republicans decide to address the President directly… on the radio. Moreover, on Saturday. Don't they know that radio is primarily a weekday medium? Most listeners tune in either on their way to and from work, or online in their offices.

On the other hand, who the fuck cares? It's just an empty, check-mark step. In reality, everyone is resigned to wait until November elections for the resolution anyway, because it's not the fiscal reasoning or survival logic that will dictate the decision. The only thing that matters for the outcome of the tax-cut issue is which party prevails. Meanwhile, GOP is trying to impress on their constituents that they are "doing something about it." Just don't call it "pressing Obama" – that's way too blatant even for politicians.

Proof-positive: politicians are not real people.

Nearly 18 months ago, when President Barack Obama first threw the number $250,000 into the tax-cuts discussions, at least some financial publications, including MSN Money, questioned the suitability of that number as a middle-class ceiling. Now, overwhelmed by the barrage of bad news, nobody talks about the number itself anymore.

But I was always interested in understanding how the fuck they came up with that number? What made "them" (whoever they are) think that $250,000 salary qualifies someone as "wealthy?" What kind of perverse minds decided that a small-business CEO, a senior financial executive, an adman, an average doctor, a sales person who spends 300 days a year on the road, don't belong in the middle class? Are they an upper-crust? Is it correct to bunch them up together with the private-equity billionaires or public companies' CEOs and make them pay taxes at the same rates?

Yes, the majority of the general population will never make over $250,000. But the same majority do not possess talents, perseverance, and drive of people who apply themselves to the best of their abilities and work 16 hours a day in order to make 6, 10, or even 15 times more than an average schmuck, who doesn't really try too hard and spends his workday surfing the Internet for TMZ news and shopping bargains.

In fact, people who make $100,000 – $750,000 a year are usually the hardest-working sector of the middle class. Most of them have built their careers or businesses from scratch. And guess what? They are not really that reach. I know CFOs, doctors, lawyers, who make $300-$350K a year and worry that they will not be able to afford $245,000 a head in tuition, room, and board to send their children through a good college.

And here lies the truth: the reason a random number is picked to determine who belongs to the middle class and who doesn't is because politicians are not real people. Just like the super-rich, they are far removed from the reality of the every-day life. Many of them are actually wealthy people. And even those who are theoretically "middle-class" enjoy a lot of paid perks. How can you possibly formulate the idea of social classes if most of your meals are paid by lobbyists and their clients?

Administration doesn't care about the economic recovery of this country.

In principle, I would be very reluctant to agree with any official political statement. But, whoever is actually behind the text of the GOP radio address got one thing right: small-business owners will be the first to suffer from increased taxes imposed on the earnings above $250,000. Maybe the plastic people in Washington don't know this, but the majority of privately-held businesses are S-Corporations and transfer their incomes to owners' individual tax returns.

So, let's imagine such small business ran by two single partners, who work very hard to keep their business going, retain their 15 employees, and maybe even create new jobs. If they are very good at what they do and also lucky, they may overcome all the difficulties of today's economic conditions and make $1,000,000 in net income. Good for them!

Now comes the tax season. Even though they left the entire million in the business, they have to split it and report $500K each on their individual tax returns. If the proposed tax rates are applied, together they will have to pay $335K to the federal government. Add to that, state and local taxes – about $150K more, and the hard-earned $1,000,000 is immediately reduced to $515,000. The $485K is taken away from the struggling business.

So, where is the incentive for the entrepreneurs to go on or go into the business? What about the "middle-class" employees of these small businesses, those who make under $250K? What will happened to them, when their employers go out of business squashed by these additional fiscal burdens on top of all other difficulties? Do you think that the government cares about them, or the "economic recovery" altogether? Or do they care about having enough money to bail out the next banking giant or a failing automaker?

CFO Folklore: You Can’t Teach an “Old” Boss New Tricks

It has nothing to do with age. Notice, I adorned OLD with quotation marks. It's rather related to obstinateness, which frequently becomes a distinct mark of business ownership. Many CEOs deliberately focus themselves on certain commanding tasks and stunt the expansion of their knowledge in any other areas. For example, your CEO could be a 30-year-old venture capital hot shot, or a 55-year-old veteran entrepreneur; most likely both possess mere basic computer skills.

Of course, they love electronic chotchkies, especially those that bring their huge mailboxes wherever they go. Then again, it's mostly just reading and writing emails, but not necessarily organizing. Most of them can use Word and Excel. Some can even create their own documents, but formatting, formulas, data manipulation, graphs and somesuch fancies are usually beyond them. Leave alone PowerPoint, Visio, Publisher and so on. God forbid they need to look up a customer's contact information in your ERP system – brace yourself for barrage of slander against "your choice" of software.

Obviously, the founders of high-tech startups don't count – everything "computer" comes natural to them. But I had a CEO only a few years ago who called his secretary into the office every time he needed to insert a column in a chart. And the funniest thing happens to these people every time you send them a spreadsheet set for printing on a legal-size paper. It's like a fucking stumbling block – they will spend at least 30 minutes trying to reset the printing area to fit the letter size before crying out for help.

For those employees who don't deal with execs on a regular basis this is somewhat perplexing, considering that most of entrepreneurs are quite capable, and sometimes even brilliant, people. But for those of us who daily interact with these semi-savants, the situation is absolutely clear. The limitations have nothing to do with their natural abilities. Their responsibilities lie in developing the business and creating jobs to fill them with people, who can produce pretty reports and fancy presentations. They don't need to occupy themselves with learning new tricks.

And that's absolutely fine. In fact, if I have to choose I'd prefer them perpetuating the business than learning how to create a pivot table. Yet, some situations are simply maddening.

I've been working on a fairly complicated customer-commitment program with one of my client's owner. Now, all steps developed and all kinks worked out, the project is supposed to culminate in an Agreement document. I drafted the first version and sent it out in the Word format for the boss's review.

An email comes back – no attachment. Instead, in the body of the message, there are multiple paragraphs of my document copied and pasted in black followed by his version of the same paragraphs in blue. The crazy thing is that on the first glance they look exactly the same, but somewhere in the middle there are several words altered. And it's like a half of the document is there. Basically, I have to visually compare both versions of each paragraph line by line to find the damn changes.

I was like, "What the fuck?!" and picked up the phone, "Adam, what are you doing? It seems like you've adjusted only a handful of minor points, but it will take hours to fish them out. Why didn't you make those adjustments directly in the document?" He is perplexed (probably thinks that I've gone momentarily stupid),"How would you know what I've changed then? You would have to comb through the entire document." The truth dawned on me, "You've never used Track Changes or Compare Documents functions before?" "I've never even heard of them."

Maybe I should've been ready for this after so many years of dealing with these people. I was somewhat stunned, nevertheless, and, in stupor, offered a training session free of charge. "Great," he said, "I am very excited. I will let you know when."

I am still waiting.

Ten Reasons Why “CFO Techniques” Is a Must-Read for Entrepreneurs

Reason #1.

You are a part of a proud cohort of just a few millions of people who summoned their courage and said, "I will not work for the Man anymore! I will be my own boss!"

While your company is growing, it will need to keep its overhead lean. Meanwhile, you can use "CFO Techniques" as a surrogate for a seasoned executive that will provide you with clear guidelines for financial and administrative management.

Reason #2.

Don't let the title fool you. "CFO Techniques" is not a bean-counting manual. It's written with a view to achieving commercial success and places business considerations ahead of everything else.

Reason #3.

It will arm you with a flexible framework for structuring your business in a logical and sensible way.

Reason #4.

"CFO Techniques" is not an academic textbook either. It manages to shed new light on various aspects of finance and business in a fun and easy language. The book is organized into a bite-sized chapters sprinkled with familiar cultural references and illustrations from the author's professional life.

Reason #5.

Yet, it's packed with practical advice,

instructive suggestions, step-by-step guidelines,

checklists,

and visual examples.

Reason #6.

"CFO Techniques" will provide you with a comprehensive breakdown on acquisition of capital resources necessary to sustain and grow your business.

Reason #7.

An entire section of the book is devoted to assessment, reduction, and transfer of the internal and external risks your company may encounter in a normal course of business and in extraordinary circumstances.

Reason #8.

"CFO Techniques" will show you that one of the most critical determinants of whether your company will fail or prosper is the active attention to its performance. The book rejects the rigidity of the uniform approach to business intelligence and underscores the importance of selecting specific indicators that will have the most significant impact on your decision-making process.

Reason #9.

Anticipating your furture needs, the book describes the fundamental steps of strategic planning and basic techniques for explorting opportunities as well as diminishing external threats.

Reason #10.

And when you are looking to hire a CFO, a valuable member of your executive team, the book may serve you as a benchmark in evaluating the candidates' breadth of expertise and depth of knowledge.

Case Study: The Marketing of Fear

In my consulting practice, I have a client who has a family-ran business. It has been established several generations back. He is doing well. Yet, one of his sons wants to be an entrepreneur of his own stature. He wants a complete independence – something I very much admire. The young man has a pretty fascinating idea worthy of at least trying to attract venture capital. Of course, he wants to do everything himself. I know the boy for a really long time – when he embarked on figuring things out, I told him he could always count on my advice if he had any questions.

He came to me a few days ago, his model clearly formulated and ready to be formalized in a business plan. But he was all out of sorts about the business plan. His original intent was to buy a PaloAlto's Business Plan Pro (still a #1 business plan software on the market) for $199.99 and work within its framework. But then somebody told him that he can go cheaper and "easier" with a Growthink's Business Plan Template – only $97 for a pre-written, fill-in-the-blanks, Word document/Excel spreadsheets. Excited, he went to look at the company's website and ended up having a panic attack.

I went to see for myself what could possibly spook him like that. Let me tell you right away that I have nothing against Growthink, a 10-year-old consulting company, specializing in business planning and investment brokerage. They appear to be quite successful in their core business of charging high-rate fees to moneyed clients looking for more funds, expansion or exit strategies.

The thing is, though, that in their daze of success they also decided to "reach out" to the general public. According to their Special Announcement, they

"regularly receive requests from entrepreneurs who want to hire Growthink but cannot afford our consulting fees. For this reason, we have developed a business plan template that allows entrepreneurs to quickly and cost-effectively develop professional plans."

How about that? They charge their conventional clients tens of thousands of dollars for their services, but here it is – for $97 you can have exactly the same thing. Well, that's nothing new. Consumer beware!

What caused the young entrepreneur to go into a frenzied mode was something else – it was the brutal, fear-fueling tactics that Growthink uses to market their side products. I don't know how they talk to their conventional clients, but their online lingo is nearly unethical.

You take a vulnerable group of people setting off on a scary quest of entrepreneurship and you tell them, "You don't know anything. We are the only ones who know all the secrets. Here, we tell you 4 out of 10 things you must know and then you will have to buy more products to know the rest. If you don't do it you are doomed. Here is another set of products with secrets from Venture Capitalists that were revealed only to us. Everybody else do it wrong and so will you, if you don't buy this," etc, etc. And it all enhanced with a rapid-speed audio.

By the time they are finished talking, the poor young entrepreneur feels he MUST SPEND $1,200, or there is no hope for him. And all he wanted to do is to spend two hundred bucks on the best business plan software on the market.

The funny thing is that the template has only three reviews. Do you think that the $1 billion of venture capital, Growthink claims their clients raised, was attracted by a ready-made generic template? I don't think so. Plus, if you are a creative person, capable of original brilliant idea, would you really want fill in the blanks and have somebody else's words expressing your aspirations?

Your Boss: Value and Madness of an Entrepreneur

Many of my correspondents (CFO's, Controllers, Financial Directors) tell me that the biggest source of their stress and anxiety is the Boss. I am sure we will be addressing this topic many times in different stories. President, CEO, Owner, or whatever title they have chosen for themselves, more frequently then not, these entrepreneurs are the main reasons for our frustration.

Some of them are courageous and brilliant who actually foster and lead, others are batty and lucky who succeed in spite of themselves, and the others are lazy and disinterested who ruin everything even with our best efforts in place. Regardless, they have few things in common.

First of all, we can never forget that they are the ones creating jobs. That's a tremendous achievement. They've got to be madly brave to go out in the world and implement their ideas, sometimes against all odds. If they succeed, they build companies that not only create products and services, but also employ people and pay them salaries. They take insane risks and end up with entities that can afford to hire CFOs, Controllers, Financial Directors, i.e. us. And even if the Bosses are not the founders, but heirs and the business just fell into their lap, until they destroy it, they are the employers and our salaries are coming out of their pockets.

Of course, as financial execs we kill ourselves in order to either facilitate their success and prosperity or stop them from killing the business. And even though we are concerned with our own material well-being just like anybody else, at the end of the day all of our efforts in a private company end up to be about guarding the owners' private purses. That kind of a responsibility to a person in the office few steps down from your own brings the level of pressure to a completely different level. It is not the same when your "owners" are some unknown masses of mutual fund investors.

But the most prominent common denominator of all small and mid-size CEOs is that they are all afflicted by the same disease – something I call an entrepreneurial bug. The business development machines in their heads run forward ahead of everything else. They want everything to be done yesterday, and those who cannot make it happen or voice their concerns are considered to be obstacles on their way to success.

Because it is up to us, CFOs and Controllers, to make sure that the back office, the financing, the structures, the control procedures, etc. are on the par with new developments, we frequently find ourselves at odds with our Bosses. We are called negative, uncooperative, difficult, etc. etc. Nevertheless, we must be strong and do our jobs right, because if we fail to cover their fast running asses, everyone will get hurt, including the Bosses.

Share this:

Share this:

Share this:

Share this:

Share this: