CFOWise

What Is the Value of Your Company?

Discounted Cash Flow? But what multiple or discount rate should we use? Inc.com wrote about a new website aimed at removing some of the mystery from this age-old question. The topic of the article is a company called You Noodle, Inc, and their website. They offer a Start-Up Predictor that guesses the value of your start-up three years into the future. I took the test and got a valuation much higher than I expected. I think they still have a few kinks to work out of their system, but this is a concept worth watching.

I have been through many professional valuations where experts come in and use a variety of formulas and other subjective and objective factors to determine the value of the company. The reality is that the business is worth what someone else is willing to pay for it. Entrepreneurs and business owners should never waste their time trying to figure out the details of business valuation. They need to focus on adding value to their businesses in the form of creating systems, processes, and procedures that create satisfied customers and reduce the labor and material inputs into the business to their lowest and most efficient forms. If you are having difficulty understanding the value of your company, please feel free to contact on of our CFO Advisors.

Top 20 Attributes of Successful Entrepreneurs – Free Assessment

The One Minute Entrepreneur” by Ken Blanchard and he offers a free assessment tool online for anyone willing to take the test – it has about 80 questions. You can take the assessment at: http://www.estrengths.com I took the assessment and it generated a 34-page report on how I ranked on each of the 20 attributes. The test is relatively scientific and believable with some basic definitions and suggestions for improvement in each of the areas. I would recommend any entrepreneur who is interested in self-improvement take the test. Of the 20 attributes, I ranked as highly developed in five of them, developed in 9 of them, and needs development in 6 of them. There are many online assesments that can lend financial help for small business in addition to offering improvement to the entrepreneur.

The One Minute Entrepreneur by Ken Blanchard and Others

The One Minute Entrepreneur is my favorite Christmas present this year. I have been reading it a little bit at a time over the last couple of days and it is one of Ken Blanchard’s best books, in my opinion. The book is only 130 pages and it is a quick read written in realistic fiction format. If you have ever started a business or wanted to start a business, then I recommend this book. The part of the book that I appreciated is the common theme of most growing businesses – receivables get harder to collect and overhead expenses start to grow to quickly. The advice on how to manage this and many other issues is relevant, although it is not as much deep as it is broad.

IRS Enforcement fell in 2008

The IRS had a rough 2008. Their overall collections were down almost 5% from 2007, their first year of negative growth in a decade. Click here to read more: http://taxprof.typepad.com/taxprof_blog/2008/12/irs-enforcement-fell-in-2008.html

Most small business financial consultants work hand-in-hand with tax professionals to serve the compliance, tactical, and strategic needs of their clients.

10 Most Important Lessons Learned by a Street-Smart Entrepreneur

Norm Brodsky gives a powerful list of his top ten most important lessons he has learned in his 29 years of entrepreneurship at this Inc.com article (CLICK HERE FOR ARTICLE).

One of the most relevant points I believe he makes is that gross margin is much more important than top-line sales.  Any one can increase their sales by lowering their prices. Not many can increase their sales by maintaining or growing their gross margin. And once fixed costs are covered, every dime of gross profit turns into net profit!

Contact one of our CFO Advisors today to help  with your gross margin.

Giving Usually Turns into more Getting

I have long been an advocate that the more a business focuses on giving the more it will get. Focus on giving more value to customers, and they will pay you more. Focus on giving more to your employees, and they will give you more productivity. Now we have proof that giving to charitable causes can acutally improve a company’s bottom line (USA TODAY ARTICLE).

Here are a few interesting stats from the article.

The percentage of people who think it’s acceptable for companies to involve a cause in their marketing has increased from 66% in 1993 to 85% last year, Cone says. Almost 80% of people say they’d switch from one brand to another if the other brand is associated with a good cause, and the price and quality are about the same, up from 66% in 1993.

More than 75% of 1,100 consumers polled in August said companies should still support social or environmental causes and non-profit organizations during an economic downturn. In the survey, by Opinion Research for cause-marketing company Cone, respondents said businesses should give as much as ever — or more.

When asked if they had to choose between two gifts priced the same and of similar quality, 77% of 1,070 people polled said they’d pick the one supporting a cause, according to a November 2007 survey by Opinion Research for Cone.

While C-Corporations receive a deduction for donating to charity (which creates some tax benefit), it appears the largest benefit from such charitable giving is the increase in the top line revenue of the firm and the brand loyalty increases. If you would like to see if your company can benefit from charitable donations please contact our CFO Consultants.

Entrepreneurs Deserve all of the Credit

I was reminded yesterday of one of my favorite quotes, one that has inspired me when I have needed inspiration. It applies to every entrepreneur and business owner that has ever been told no by the bank, laughed at by his colleagues and peers, and felt alone in their vision to make their ideas become a viable, commercial enterprise.

This quote is from Theodore Roosevelt, and it is all over the web. I pulled it from this article.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”

To every business owner and entrepreneur, charge on. You deserve all the credit!

Our CFO firm is committed to helping entrepreneurs and business owners charge on.

Stimulus Package For American Innovation And Entrepreneurship

The Association for Competitive Technology (ACT) recently put together a series of policy recommendations to the incoming administration that are specific to helping small and medium sized technology businesses. You can read it here: STIMULUS PACKAGE

They also have a forum set-up for anyone that would like to contribute any ideas, suggestions, etc. You can visit that forum here: FORUM ON STIMULUS PACKAGE.

One of the greatest needs of start-up technology companies is the right guidance to commercialize their products/services and then grow into profitability with little or no investment capital.  Many of these companies have found an affordable yet still effective solution available through CFO firms: part-time CFOs who act as CFO Consultants to help guide these founders and entrepreneurs to success.

1 Way To Reduce The Anxiety You Feel Towards Your Business

Every entrepreneur and business owner I have ever met feels anxiety towards his/her business.  In these difficult economic times, anxiety levels usually rise. What is the source of the anxiety? How can you start to get rid of it? Please allow me to try and answer: the greatest anxiety usually comes from the unknown.  Here is an example.  Let’s assume your largest customer represents 25% of your business.& Your customer tells you that she is having significant financial problems and she may need to reduce or altogether eliminate her business with you in the next 6 months. Enter Stage Left – ANXIETY.

How can you survive that? What will you do? As these and other questions arise in your mind and remain unanswered, your anxiety towards your business will most likely increase.

Here is the way to begin to alleviate your anxiety – we will continue with the example above.

First, we need to create a projection, pro forma, or budget of our operations for the next 12 to 24 months without the loss of the customer included in the projections. This needs to include both the income statement and the balance sheet so we can understand both the profitability and the cash flow of the business during the specified time.

Second, we need to understand all of the elements of our relationship with this customer that we might lose. The easy part is saying we need to reduce sales by 25%. But what about this customer’s impact on gross margin? Do we earn a higher or lower gross margin with them than our company average? Are there elements of our fixed cost structure that might go away if the customer goes away? Does this customer pay faster or slower than our customers? These questions begin to derive the true impact of the loss of this customer on our overall profitability and cash flow.

Third, we need to make adjustments to our projections to account for the loss of this customer. This can be a bit tricky, but is certainly possible.

Fourth, we need to objectively analyze the results. What impact would the loss of this customer really have? Sure we have had to make a few assumptions, but we will be pretty close to knowing the answer to this question. With real answers, the anxiety will begin to subside. Even if you don’t like the outcome, knowing the outcome immediately removes a big part of the anxiety. This information will empower you to handle this or any other issue that arises in your business.

The CFO of an organization should be the largest factor in reducing the anxiety of the executives and owners running the company. Whether this CFO position exists full-time or with a professional in the capacity of part-time CFO, every business can benefit from this benefit, not to mention the rest of the value proposition that a senior finance executive brings to the company.

Now the Fed can Lower Rates no More

With its recent move to lower the fed funds short-term interest rate to 0-.25%, they can no longer use this tool to stimulate the economy USA TODAY article.

When car dealerships began advertising 0% interest loans to drive sales of their vehicles, I remember one General Manager worrying that the industry was at its very lowest pricing possible. His justification was that they could do nothing else to incent sales, and they would incur a healthy cost to do it.

Even though the Federal Reserve has other tools at their disposal, their control of this rate has always been viewed as their most powerful tool to stimulate economic growth, curb inflation, and maintain a healthy economy. Now that the rate can go no lower, we can only hope it will help through these tough economic times. If things get worse, then we may see the Fed move into non-conventional efforts. I don’t think any of us know exactly what those efforts might be. I am not doom and gloom about our economy. I think this current situation is actually a healthy cycle, all things considered. I also have my eye on the Fed to see what they might do next.

With so many things happening economically, I have been asked on many occasions if there will be an increase in interim CFO jobs. Generally speaking, with firms shrinking and looking for ways to save, and with higher unemployment, I don’t see an increase in demand in this area for the foreseeable future.

5 Ways to Reduce Your Vulnerability During the Credit Crunch

I was reading on managing cash flow during this tough economic time and found some nice suggestions in this article. From the perspective of a CFO advisor, some of the suggestions are a bit vague, but it should get your thoughts headed in the right direction. 

Enjoy.

Accounting Coach

Here is a great website I found for anyone that wants to improve their accounting skills: www.accountingcoach.com

The author of the website also has a Question & Answer blog that he respnds to frequently. This is an interesting and valuable for tool for many, and could also provide financial help for small business.

Financial Statement Fraud Hard to Detect

In a recent survey conducted by Grant Thornton, 688 chief financial officers and senior comptrollers weighed in on financial statement fraud. Here is what they said: 79% of those surveyed agreed that CFOs could intentionally misstate a company’s financial statement. I do not beleive this is a surprise to anyone. CFOs and CFO Consultants have a great deal of authority when it comes to their company’s financial statements, and they are usually smart enough to know how to the financial statements if they choose to be dishonest and unethical.

But this may suprise most readers: Of those surveyed, they were asked if it is possible for auditors to detect all corporate fraud.  An overwhelming 85% said no – auditors would not be able to find all areas of fraud in a business. If auditors cannot find the fraud, then think of the millions of dollars being spent on Sarbanes Oxley compliance audits that, according to senior finance executives, does not address all of the potentials areas of fraud.So, even if a company is SARBOX compliant, we still cannot be assured that the financial statements are free of fraud.

SOURCE:  USA TODAY

0% Return on 4-week US T-Bills

I was shocked to read a recent article in the USA TODAY titled:  Rush to Earn Nothing

The 4-week US Treasury Bills recorded their lowest auction rate in history at 0%. Investors were willing to let the US Government borrow their money for four weeks for no return. There are several implications of this: We have to think this through logically. Investors make their investment decisions based on their risk vs. return criteria. US T-bill investors are specifically seeking low risk options for their money. Instead of earning some interest over the next four weeks, these investors accepted a zero percent return.

First, they must continue to have great confidence in the US government’s ability to repay their principal investment.

Second, they must feel like there will be no inflation over the next four weeks. One dollar today will still be one dollar in four weeks. Both of these reasons are good signs for our struggling economy, but we still have a long way to go.

New Resource for middle market Companies

We found a great blog about growth and exit strategies for middle market companies and thought we would share the link with you. http://www.corporatefinanceassociates.com/blog/.

Often exit strategies can mean CFO job openings increase, mainly because the head finance position is either consolidated into a new organization or the new leadership brings their own CFO to the company.