Finance for Non-Financial Managers

They just don't get it, do they?

2012-02-01T12:24:10-08:00

The February 1 Wall Street Journal (today's) carries a front page article ("When the Home Bank Closes") about the founder of a startup company that has no financing, has garnered huge potential orders for his products, but is inconvenienced by the bank pulling the home equity line he was using to finance his business because the value of his home had sunk. Awww shucks!!!

Despite all that we and others have written on this topic, it seems there are always aspiring entrepreneurs who don't get the message, or don't believe it. In this case he even got Big Media attention. I'm certainly not a fan of the big banks' methods of managing their businesses at customers' expense, but that's not what this is about. If the value of the bank's collateral goes down, they should be entitled to ask for more collateral, since their job is to lend the money and then get it back again. No, what this is about is a startup that is inadequately financed, not yet profitable or self-sustaining, going after a chunk of business that it cannot hope to support without a loan for which it has no collateral. That perennially bad idea that if we just sell enough stuff, everything else will take care of itself.

The reality is that it doesn't. Selling more than you can deliver simply causes a sequence of bad things to happen. the CEO is euphoric about the sale, then stresses about how to deliver, THEN looks for the source of capital, and typically guesses low on what it will take, when it will be needed, and how much profit will be earned when the deal is done. And finally, of course, the customer will have gone through such trauma to get their goods, or not get them, that they'll certainly not come back again.

Wouldn't it be simpler to just plan your growth rate and resource needs together? Or does that make it less exciting?

As always, I welcome your comments and feedback.

PS: The same paper carried another article today entitled: "How to finance your startup without home equity."

2012-01-20T11:01:36-08:00

Message to ex-military: Pentagon Federal Credit Union - Stay Away!!!
This organization is actually working hard to keep its members' information private - even from its members! Easy to enroll and send money, but requires THREE NOTARIZED DOCUMENTS sent to them before I can actually get any account information - OR CLOSE THE ACCOUNT. Procedures must have been designed by the CIA! Am I angry? Nah...

Bridging the liquidity gap - a small business dilemma

2011-11-21T07:29:00-08:00

"...three out of four small businesses that applied to banks for credit in 2010 got none or only some of the amount they asked for; half were rejected outright." That quote comes from a study conducted by the New York Fed and published as part of a webcast sponsored by CFO Magazine and The Receivables Exchange, an asset-based financing company. CFO Magazine's research arm actually conducted a survey late last year to learn about what small business CFOs were doing to cope with the situation. In spite of the study's discouraging findings, 57% of CFOs surveyed said they still intended to go to their bank for additional financing.

The survey report is well worth reading, and if you can't find it online ask me for a pdf format electronic copy.

But the point is not to dwell on the obvious, other than to remind you that you're not alone in being unable to get growth capital from your bank. The point is this: It ain't gonna get better anytime soon, so get used to it and find another way! So how does a small or mid-sized business get the capital they need for growth or restructuring or even as an exit for the long-time owners? one axiom is still true: If you keep doing what you've always done, you're not likely to get a different result. The tools of capital raising are many and varied, and while some work only some of the time, e.g. borrowing from your bank, others will work when the more traditional methods don't.

So look for other options. Get yourself an independent advisor who is not employed by one source of capital and ask them to help you explore the options that are best for your business and your strategic and personal goals. Then when you know what you want, go after that source with the right preparation, the right story, and the right support team. You'd be surprised how different that will make you look compared to all those businesses that DIDN'T get the money they asked for.

As always, I welcome your comments and feedback.

Employment growth in small business - new data

2011-11-02T09:16:22-07:00

Macroeconomic Advisors reported this morning that the US economy added 110,000 private sector jobs last month, a bit more than predicted. More importantly, they all came from small and mid-sized businesses. All of them. Some things don't change, and one of them is that small business produces most of the job growth in this country because small business does most of the growing. Now is the time. If your business isn't growing today, you're doing something wrong. Find out what it is and fix it.

Gene Siciliano announces new book project

2011-09-16T17:00:00-07:00

Press Release

A compendium of 26 nationally known business experts.

Los Angeles, September 16, 2011: Gene Siciliano, CPA, CMC^®author, consultant, professional speaker and business coach, announced today his participation in a new book project, THE Book on Business from A to Z: The 260 Most Important Answers You Need to Know. Compiled and Edited by Daniel Feiman, MBA, CMC^®the book contains 26 chapters written by 26 of the best experts available on each of the key topics covered in the book.

Gene authored the chapter on cash flow in recognitionof his belief that cash flow has become the measure of success or survival during the past few years, particularly for smaller companies that were unable to tap the few drops of credit that banks have been prepared to offer to their customers. Cash management including efficient deployment of cash and proper cash flow planning are often the difference that keeps a company alive and helps them get prepared for the endlessly delayed economic recovery. Gene said “I was delighted to be asked to write on this topic, because I think it’s perhaps the most important topic in the book.”

Daniel Feiman wrote on his website: This book is great especially for people who need a fast read with direct answers to specific business questions Excellent for either a new or existing business. This is for absolutely everyone in search of solid information on a range of business subjects. …

The range of subjects goes from Marketing to Branding to Valuation to Turnaround. If you want the answers to many common business problems and challenges, you will find them in this book.

While it is impossible to do full justice to every business subject in a single volume, what will surprise you is how much useful material the co-authors manage to provide in this one. Although the format is standardized, the individual co-author’s style remains to engage the reader on the essential points in each chapter.

The book is available on a pre-publication order basis from Amazon.com, Apple’s iTunes, BuildItBackwards.com or a bookstore near you.

Sunny Robilotta - Nonprofit CFO of the Year!

2011-09-07T17:26:44-07:00

"In a packed Millennium Biltmore Hotel grand ballroom in Los Angeles today, and with a very competitive field of CFO Finalists (40 in total), Sunny Robilotta, CFO of Exceptional Children's Foundation, was named the 2012 Nonprofit CFO of the Year by the Los Angeles Business Journal's panel of judges. The award, in a highly competitive category in a town with literally thousands of nonprofit organizations, places Sunny among the City's elite financial leaders, a place she has occupied for years among all of us who work with and know her."

This announcement was made today by Dr. Scott Bowling, CEO of Exceptional Children's Foundation, a wonderful service organization on whose board I have served for over a dozen years. I was there as the award was announced, and to share this honor with Sunny and ECF.

Great work does bring its rewards. I thought you'd like to know.

Amazon.com best seller: #31 in Corporate Finance

2011-08-22T12:08:00-07:00

My long-standing best selling book, "Finance for NonFinancial Managers," hit #31 on Amazon's list of best selling Corporate Finance books recently, an indication of how high quality content is truly ageless even in today's world of rapidly growing information via the Internet.

Available in hard copy or eBook from Amazon, or in hard copy signed by the author at www.GeneSiciliano.com. If you don't have one you might ask yourself "Why not?"

As always I welcome your comments and feedback.

3 Great articles: August issue of Nonprofit Business Advisor

2011-08-22T06:00:00-07:00

This month's issue of Nonprofit Business Advisor has some great reads, including these:

IRS true to its word has removed the tax exempt status of 275,000 organizations that failed to file annual reports for 3 consecutive years. If you've missed 1 or 2, time to take quick action.
Two articles on a Congressional Budget Office proposal to modify charitable deduction rules, including some very forward thinking out of Fordham University's Center for Nonprofit Leaders.
A very well written article on salary negotiation strategies for nonprofit executives in transition, based on an interview with a seasoned recruiter.

The publication is a product of Wiley Periodicals, Inc. Subscriptions via US mail or email are available by calling 888-378-2537 and back issues can be accessed by subscribers at www.wileyonlinelibrary.com.

Cyber Security to Avoid Having Your Car Stolen

2011-08-21T19:00:41-07:00

Another scary cybercrime news item from Dr. Stan Stahl (stan@citadel-information.com ), who reports these events to give us reason to be cautious, especially if you drive a late model car. He says:

Theft via text: Cars vulnerable to hack attacks: Texting and driving don't go well together - though not in the way you might think. Computer hackers can force some cars to unlock their doors and start their engines without a key by sending specially crafted messages to a car's anti-theft system. They can also snoop at where you've been by tapping the car's GPS system. Source: VolunteerTV, August 19, 2011

Requirement to rotate auditors? It could be coming to you...

2011-08-17T16:06:59-07:00

Today the US Government's auditing watchdog board (PCAOB, or Public Company Accounting Oversight Board, for those who care about the details) announced they are actively considering a new rule requiring public companies to change independent auditors every few years. This action comes in response to numerous studies that show that the independence of many accounting firms is still not what it should be, despite the new rules imposed in 2002 by Sarbanes-Oxley.

Why do you care? Because 'Sarbox' rules ultimately flowed down to many in the nonprofit world, as evidenced by California's Nonprofit Integrity Act of 2004 and similar laws in other states. And because auditor independence is still an issue for those serving the nonprofit community, just as it is for public company auditors. So if you've had the same audit firm for 5 or 10 years because you like them and because they know you, you can appreciate how that sometimes leads to audit reports that may be more favorable than they might be if a new firm was doing the audit.

What action should you take? So, for now, be aware of the possibility. If you have political figures among your supporters, you might look for the opportunity to let them know how you feel. Better sooner than later, as they say.

And if you have not yet formed an audit committee of your board, consider doing it NOW.

As always, I welcome your comments and feedback.