small business – Page 4 – The Frustrated CFO

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.

CNN Breaking News: President Obama Is Elevating SBA to a Cabinet-Level Agency

In my book "CFO Techniques" I praised the U.S. Small Business Administration agency (SBA) for its role in supporting small businesses, particularly with their loan-backing program, and the amazing informational gold mine that is SBA.gov site – literally, the best resource out there. It's no surprise that when CNN's news flash quoted in the title of this post has arrived into my mailbox last week, it immediately caught my eye.

You've got to admire the skills of the public relation specialists in Washington (I wish my publisher's PR department was as masterful, or at least as industrious)! Look at the words selection: "elevate to a cabinet-level." Wow! Sounds like the president is going to take the "lowly peasant" (never mind facilitation of over $30 billion in loans per year and $570-million budget) and magically transport it to Mount Olympus to reside there with gods. And how democratic! The whole agency is being "elevated," as if all of its 2000 employees can be members of the cabinet. Some people may even think that this will empower the small businesses and their interests will become "special" – just like the ones of pharmaceutical giants, auto manufacturers, big oil, and mining conglomerates.

In reality, the only person who immediately benefits from this move is the SBA's Administrator, Karen Mills. She has become a member (already listed on www.whitehouse.gov/administration/) of Obama's cabinet and now will rub shoulders with the likes of Hillary Clinton and Janet Napolitano.

Whether Ms. Mills' accomplishments at SBA (or credits she takes for her subordinates' accomplishments) justify her new status could be a subject of an investigative journalism exercise. If it's White House's conclusion that she is the best candidate for providing the President with the advice on the only opportunity to save this country's economy, i.e. cultivation and support of the small-business environment, then be it.

I am more interested in the actions that will follow this first step in what being hailed as a program for raising "international competitiveness of American companies." You see, SBA is not meant to remain a cabinet-level agency for too long. In fact, it's not meant to stay a government agency at all. The intention is to "merge" SBA, along with the Export-Import Bank (ExIm), the Overseas Private Investment Corporation, the Trade and Development Agency, the Office of the Trade Representative, into the Department of Commerce (already a member of the Cabinet).

Whether they will continue calling this newly formed government Chimera the Department of Commerce or find it a new name (the way it happened with the Homeland Security), it is obvious that the already existing ministry will absorb all those other entities and, as it always happens, with the loss of independence, their functionality will be stunted.

Look, what happened when HMOs started swallowing far more flexible smaller health insurance providers and formed such giants as Aetna, CIGNA, Health Net, and United Health? Did it make anything better for members? Of course not, we all know this: the premiums went up and the coverage got worse.

Do consumers and businesses benefit from the crazy wave of bank mergers we have experienced in the past 25 years? Again, no. The services get worse and the fees get higher (plus, the process contributes to unemployment).

Any type of consolidation cannot be considered an improvement. It's done for a show – to demonstrated that something cardinal is done. The results? Who cares?

In case of SBA, this is really a shame, because they have made already and could've continued making a significant positive impact on the struggling entrepreneurial business sector. Now, their good initiatives will be drowned in public policies, fiscal regulations, national directives, and all that other country-wide crap. Their micro-level approach will be gone forever.

I find it incredibly ironic that the entity dedicated to help small businesses will be remodeled as a part of a large-scale program.

Scenes from a Business Lunch, or the Obnoxious Rudeness of Business Owners

Speaking of lunches (and I swear this is my last holiday post of the year)…

Because there are so many corporate holiday events in December, many business people from all over the country and overseas come to New York City during the month. Customers, suppliers, vendors, associates, partners, and other relations visit their customers, clients, etc. So, on top of the parties, you've got lunches with out-of-towners. This is a perfect opportunity to observe the business-owners' behavior in a "casual" group setting (as opposed to conference rooms and other natural habitats).

For many visitors this is also a good occasion for combining business and pleasure (after all, NYC is still #6 most favored tourist city in the world and #1 nation-wide) and quite a few bring their spouses along. Some are actually in business with their spouses.

At the most recent lunch outing of this kind my guests were a manufacturing business owner by himself, another business owner with a wife, an alpha-female head of a consulting group, and a husband and wife attorneys sharing a corporate legal practice. Fun bunch! Don't worry kids, it's only going to get worse!

The manufacturer asked for a coke and downed it really fast; then had it refilled several times throughout the meal. This, naturally, resulted in a fast accumulation of a lot of gas in his stomach, which he unceremoniously belched out every 10 minutes, or so. It was obviously a habitual occurrence, because he did not even bother to apologize. It's amazing, how we learned to hide our emotions in "business" situations – everyone pretended not to notice it, even though once in a while one could catch a hint of a smirk or disgust (depending on the personality) playing on the lips of other guests.

[Side note: This reminds me of another experience in my arsenal of wonderful memories. Early in my career I worked for a company, whose owner, in my mind, will forever carry a title of The Farting Boss. He was middle-aged, but had a younger second wife and wanted to loose weight by drinking glass after glass of Slim Fast. This made him very gassy. The man mastered the skill of silent farting, but the smell was literally unbearable. Imagine my situation – we sat in the same room. Good times!]

The lady consultant first tried her sales pitch on every guest around the table, but quickly lost her enthusiasm, when she realized that nobody is interested in her services, except for me. Since my company already had a contract with her, she did not see a reason to waste anymore time on us and turned her attention to the Blackberry, answering emails between bites and white-wine sips.

The married businessman first attacked his wife in a very loud whisper (it could be heard even at the neighboring tables) for wearing shoes with heels. This apparently slowed down his purposefully brisk gait that went well, I am sure, with his aggressive mannerisms. After the woman's eyes welled up with tears he abandoned her to fight it back on her own and observed the rest of the battlefield in front of him. Dismissing the burping guy and all females as inferior creatures, he concentrated his self-affirmation efforts on the attorney sitting across the table from him.

They went at each other like two roosters in a Filipino cockpit. "Have you read this?" "Do you know that guy?" "I bought Apple at $25 and just sold it at $375." "I am keeping mine – it will be $500 a share in a year." "I closed that famous private equity deal this year." "I brought this much venture capital to my business." "I am opening new factory in China." "We have a law office in Hong Kong!"

God! I contemplated the scene thinking, "The things we must tolerate to earn a living!"

Book Recommendation: “The Imperfectionists”

Tom Rachman's "The Imperfectionsts" have received the most glowing literary reviews for a debut novel I've ever encountered. It is, indeed, a wonderful book. Maybe one day, I will switch to cultural critique and start writing belletristic essays about artistic qualities of creative endeavors.

For now, though, this is a blog for working stiffs, primarily those operating in entrepreneurial environment with all its quirks, disadvantages, vulnerabilities, strange dynamics and faulty objectives. Unexpectedly, in addition to its novelistic value, "The Imperfectionists" had something remarkable to offer from that standpoint as well. Its setting, "the paper," is a microcosm of the small-business universe. The book dissects extremely personal matters of human misery; and the author appears to be digging deep into his first-hand experience with actual people, whose traits fed his imagination. Yet, these characters turned out to be a surprising array of archetypes we meet everyday in our offices.

You've got a backstabbing bully, who uses the little authority his position allows him to doll out misery to others and boost his own ego by spewing teasing insults. You've got a quiet schemer, who hides behind the wall of seeming indifference, while devising and implementing his intricate plan of revenge and ascension.

You've got your driven career woman who will sacrifice everything, including her own happiness, in the pursuit of what she defines as success. And you've got a perfectionist with encyclopedic knowledge of all matters related to his profession and ambition of high quality.

You've got your obsessive-compulsive sloppy staffer, who has been there for twenty years, still as mediocre as ever and ridden with fears of dismissal, displaying the full spectrum of passive-aggressive behavior. And so on, and so forth…

There is even a painfully familiar female CFO who thinks that the other employees "can't accept that she's young and a woman and above them in the food chain. But she's the one keeping them employed." Sounds familiar?

And yes, there is the expected succession of private owners: from the brilliant founder; to the son, desperately trying to prove his worthiness, but failing exactly because of that; to the completely disinterested and unfit grandson. None ever caring about people they employ and at the end betraying their own legacy.

The business is small, struggling in the era of media transformation, dying… I was astonished with Mr. Rachman's description of the strange sensation overwhelming the employees when they realize that this stage of their lives is over – I have observed these emotions in people's eyes myself: "All these years, they have vilified the paper, but now it's threateining to quit them, they're desperately in love with it again."

Isn't this amazing that inside a very private book we still find characters so familiar, we recognize them as if they were our co-workers and, in some ways, ourselves. What does it say about us? Is it possible that with all our uniqueness and human individuality, when it comes to our jobs, we just fall into the draws of files organized by type?

Am I Cursed?

Well, it's definitely feels like I am. Throughout my entire career, every time I start a new job or a long-term consulting project, no matter how exciting and successful the business seems, it takes me under 4 weeks (sometimes less than 2) to uncover hidden losses, cash flow deficiencies, operational problems, strategic mistakes, distortion of accounting principles and policy violations. There has not been a single exception to this rule.

Of course, I devoted my career to dealing with privately-held small and mid-size companies. Frequently their CEOs are entrepreneurs with limited understanding of corporate governance, let alone the makeups of quality accounting and finance functions. These companies develop in a haphazard manner and the staff is usually composed of people who are eager and hardworking, but not necessarily highly qualified. The conceptual thinking, I am always so keen on finding, is rarely present.

I've been studying my current client for exactly three weeks now. Oh boy! The company is a wholesaler, but the operating software they bought for a lot of money was created for manufacturers, and it's so rigid, it will require major re-programming to adapt it to their needs. The principle feature of this type of businesses – the lot-driven operations that require lot-specific data tracking and analysis, cannot be accommodated by the software and, therefore, needs to be performed at a great time-cost in Excel. The chart of accounts is completely screwed up and there is no hope to adjust it properly since they already started making entries. There is an endless duplication (and triplication, and quadruplication) of data in different files kept on their local drives by individual employees… And so on and so forth. They don't even have a backup system in place, let alone business intelligence.

But most remarkably, NOBODY (not the co-owners who buy and sell the product internationally for years now, not the logistics managers, not the internal accountants, nor independent auditors) understands the principles of Incoterms. As the result, the revenue, costs, and inventory recognition is royally fucked up. I restated their 9-months 2011 results to proper values and found… you got it – losses!

Sometimes, it makes me wonder, what would happen if I got a chance to dissect a huge belly of some public mammoth. Would the same rotten bullshit pour out of them? The fact that big-time public companies constantly underperform and require bailouts makes me kind of suspicious.

The truth is I don't believe that I am cursed. I think that the majority of companies manage for some time to ride on the wave of a particular product/service demand, or some market twist, or accidental economic development, or novel idea. Yet, they are drowning in small and large errors affecting every facet of their existence. And when the shit hits the fan in the form of financial or operational problems, their chances for survival are minimal because there is no quality back-office structure to sustain them. Moreover, frequently they don't even see it coming, because they operate blindly in the absence of informational support.

The problems may come to light before the downfall if a perfectionist like me appears on the horizon. Such a person may be either hired as a permanent employee, or come along as a part of a consulting team (an option frequently unaffordable for small and midsize companies). So, this client of mine got lucky – one way or another I will correct all their problems. Others out there… it's scary to think about them. Is it surprising that with this poor quality of back office, lack of informational reporting, and all the errors they commit along the way, the companies are going out of business left and right, and the economy has gone to shitters?

I do have a solution that can help many of the companies precariously hanging on the verge of extinction due to the deficiencies in their policies, procedures, controls, and reporting functions – an affordable and easily accessible electronic consulting solution that covers all these areas of expertise and puts a multitude of tools at the fingertips of executives and financial professionals. Let's hope that I will be able to attract investors to back my ideas and bring this revolutionary development to the millions of small and mid-size companies.

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