The Oscars Go Youth Movement
Interesting. Yahoo is my home page and the first headline this morning I see IS NOT about best picture or best actor, rather how James Franco bombed as an Oscar co-host. Personally, I think I liked his laid-back personality better than Anne Hathaway’s bubbly demeanor.
The ‘experts’ in my household informed me Franco and Hathaway were chosen to appeal to younger audiences. If that’s true, make the show be 15 or 30 minutes.
But here’s my point. As the Oscars went youth movement to lead the global event, I started thinking of the youth movement that will be tomorrow’s business titans.
I just have one recommendation, and it’s one I share over and over again whenever I have the chance to talk to young people. READ. READ. READ.
And what to read? Start with auto/biographies of business founders. My all-time favorite is Building a $400 Million Company from the Ground Up by Sandra L. Kurtzig of ERP fame back in the 80s. She may have been one of the first female CEO’s to run a public company. You can also Google companies you admire to see what books have been written about them.
While my favorite biz publication is The Harvard Business Journal, young people should be devouring Fast Company and Inc. Ideas abound in those magazines.
Finally, find an industry you love and start reading literature in that industry. For example technology and health care collectively will probably see the most sweeping changes in any discipline over the next five years. Read, learn, act.
So after you make your millions, let me know what you read along your journey.
3400% Growth
So what does a company look like that grows 3400% year-over-year and signs up their 6,000,000th user?
Take a look at this graphic on foursquare’s blog.
P90 – Week 12
Another week down and roughly 4 more to go. Then it’s on to my next phase (more that later).
Power 90 and it’s big brother P90X are not just fitness programs. You see the results on the infomercial and YouTube. But fitness is half the process. The other half–the most important–is the health part. Here’s how I see it:
Fitness–cardio and resistance work from 20 to 45 minutes a day 6x weekly
Health–eating right every day
Better Health
No one says you have to perfect this overnight. Here’s what I did:
1. First, I dropped the diet soda. I drank tons of it. But I dropped it. Aspartame is a dangerous chemical. Dump it. And nixing the caffeine was a side benefit too. By getting off diet soda, I was getting rid of two bad habits at the same time.
I still liked carbonated drinks, so then I had the occasional sugar-laced soda. But I had my last one in late December. No regrets and no cravings two months later.
2. Then I dropped the processed sugar. That meant getting rid of lots of junk food. So junk food is a thing of the past. And I feel great. I still have my sweat tooth. At least daily, I eat one protein bar that has some sugar, but not as much as you’ll find in a candy bar. And those hit the spot, plus they have good things in them too.
3. Salty snacks. Gone. Took a while, but they are gone. In January, I was still eating salted peanuts. I’ve now replaced them with walnuts and pecans (right from the shells). In fact, I put the walnuts on my salads for added protein. Awesome.
4. And finally, I’m now loading up on vegetables and fruit. The goal is to expand my taste range. I eat ample helpings of broccoli, peas, carrots, and the standard toppings on a salad, but I will need to mix it up to make this a lifelong endeavor.
5. Drink lots of water. Just yesterday, I probably had 100-plus ounces, but that’s because yesterday was a cardio day. So replace the soda with water. Water also curbs appetites too.
6. Eat regularly. I now eat 5 times a day. By the time evening comes, I’m just not that hungry, but I have to since I’m working out. If I’m not that hungry, I do a meal replacement shake that’s filled with a plethora of great vitamins.
See the strategy above? I started small. I started by slowing eliminating here and there to the point where it worked.
Today, I’m experimenting with dairy products. I love milk, especially right from the cow. You see, we get a milk delivery every week from the dairy farmer right behind my farm. It’s far healthier than that white stuff at the grocery store. But cow’s milk has it’s issues too, so I’m cutting back in March to see what happens.
Again, why are we doing this? Think long-term. Fit at 70. In strong shape at 80. And feeling great right NOW!!
Think lifestyle. Yeah, I’m having a lot of people ask if I’ve lost weight. That’s not the aim. The mission is healthly living so we can do the other more important things in life.
See you next week.
Health and Fitness Page
To LIBOR or not to LIBOR
Interest rate risk. Ah, my favorite thing in the world.
Just kidding. This is hard stuff. Remember, I”m just a small town CFO from the nation’s breadbasket.
Most of your borrowing is pegged off the prime rate which stands at 3.25%. And typically, you are borrowing at 100 basis points to 150 above prime.
However, with larger banks, you can take advantage of short-term LIBOR-based notes. For short-term borrowing needs, say 3, 6, even 9 months, take every advantage of the LIBOR-based options you have at your disposal because that pricing will always be lower than the prime-based options–sometimes upwards to 200 or more basis points. Just remember, your libor-based borrowings will decrease from your overall LOC borrowing capacity.
What About Longer-term Notes?
Now the fun begins. Let’s say you are renewing a $1 million real estate loan. To make it easy, let’s say LTV (loan to value) is 50% and the underlying cash flow to support debt service is solid.
What do you do? Fixed or variable where the variable is pegged off LIBOR?
There is no right or wrong answer because the answer is based on your risk tolerance. I’m betting most business owners go the fixed route. Conservative? Yes. But it’s one less worry for the small biz owner. He/she does not have to be on the Bankrate website continually.
But here’s some simple guidance. Do a blend of the two. Consider fixing the rate over a 3 or 5 year balloon period, and go variable with the rest. In general your variable (LIBOR) rate will be 200 to 250 basis points under the fixed rate. So the question becomes, “Will the variable rate hit the fixed rate within a 3 or 5-year time period?” I don’t know. That’s a decision you have to make.
There are no easy answers on this topic, especially if you are not skilled in these areas. Heck, most CFO’s are not either. But the point is to let you know there are options and to think outside the box. You do not have to go fixed for the entire journey. You can certainly mix it up.
Image from www.bankrate.com.
What if you lost your Star* Employee?
For those of you that follow baseball, you might know that Adam Wainright of the St. Louis Cardinals has been one of the most dominant pitchers in all of baseball for the last 2 years. Last year, he won 20 games and then 19 then year before that. The guy is just plain solid. Plus, he’s awesome in the clubhouse. And he loves learning how to improve his game from other pitchers. He’s any manager’s dream of a player.
Unfortunately, the pop happened in the elbow this past week. Well, not literally, but elbow issues caused him to head back to St. Louis for an examination. Afterwards, he was told he’ll need Tommy John surgery. This means he’ll be out of baseball till at least mid-2012. It’s a blow for Adam and his family, and it’s a blow to his employer, the St. Louis Cardinals.
What happens now?
And that’s really a question for you. What if you lost your most important employee? Consider the scenarios below:
While you are a small to mid-sized business, you will still lose your share of employees. Even the best ones.
So what is the answer? I call it Scenario Thinking.
At least quarterly, when you leave the office to do nothing but business planning, part of that time should be considering what you would do if you lost your best staff. List your best team members from 1 to 10. By each name, list what you would do if they left. Or, what would you need to do? Additionally, what does that do to the business? To your staff and morale? To sales? Operations?
You don’t have to have the answers, but think them through. And when the inevitable does happen, you’ll be better prepared instead of blown away like most Cardinals fans with the loss of Adam Wainright.
What if the CEO Goes Down?
While you are at it, do you have contingencies for yourself? Heart attack? It happens. Sking accident, that could happen too. Cancer? Ask Steve Jobs.
Yes, you need a contingency for yourself too. Who could step into your shoes if needed? What if that person does not exist?
Now you know why this excercise is very important. Don’t take it lightly.
Along these lines, check out an HBR article called How a CEO’s Injury Helped Him Revitalize His Young Firm in the March Issue. If you get the hard copy, it’s on page 118.
Summary
Bottom line, you will lose staff from time to time, even the best ones periodically. Life will go on, but have rough idea what to do when that happens.
The world will not end when this happens. If you have properly planned, you will experience setbacks. You may lose business. Earnings may drop. But if you do some basic Scenario Thinking, your setbacks should be no longer than 6 to 12 months.
All of a sudden, maybe coaching and mentoring your team members just became a higher priority.
My Newest Toy – A Heart Rate Monitor
One of my newest toys is a heart rate monitor. Why didn’t I have one of these when I ran?
I used to run some 1,000 miles a year in my 30′s and early 40′s. When I ran races, I did the first mile way too fast. I was wasted at the end and finished poorly. I started learning how to pace myself, but a heart rate monitor would have greatly helped. My best 5k time was 18:10. With a heart rate monitor, I bet I get under 18:00.
So What is It?
I’ll leave out all the science and keep it simple. All of us have a maximum physical threshold. Think about running from here to the next town at a full sprint. Full speed. No holding back. Within a minute or less, you’d be wasted. You would have to walk. You would be gulping air big time. Breakfast is probably in front of you on the ground. No kidding.
When that happens, your maximum heart rate is somewhere around 180. For me, my maxium heart rate is 170 (roughly 220 less your age).
Accordingly, a heart rate monitor measures your heart rate. My resting heart rate ranges from 60 to 63. When training, that means I can gauge how far I can push it. I’m okay at getting to 150, even 160. But my best high-intensity training rate is 148 which is 87% of my maximum heart rate.
Observations
I do high-intensity interval training on a recumbent bike at home. The program is called the Sprint 8 made famous by a health and fitness guru named Phil Campbell. I now do my Sprint 8′s using the heart rate monitor. Observations follow:
1. With the monitor I can do all eight measuring my heart rate. Yeah, I still feel like upchucking when I get done, but they are far easier than without the measuring device.
2. You already know this, and so do I–you can only maintain that high level for a very short time. You can do it for about 30 seconds at your maximum intensity level (for me, it’s around 150).
3. Odd, when my 30 second interval is over, my max heart rate still rises for about 10 seconds, then it starts dropping.
Business and the Heart Rate Monitor
And yes, there is a relationship between business and threshold training with a heart rate monitor.
First, every business will have times it needs to push it. A new product line. New machinery or equipment. Rolling out a new website or two. Converting to a new ERP system. Remember when you did those things? Think back when you started business. Every day was at 90 MPH. There was no slowing down.
And I really feel for professional services firms. Especially CPA firms where there is the revolving door of adding and losing employees. It’s because the pace is non-stop during tax time. It’s non-stop during the audit season.
And in spite of the breakneck speeds, there is no rest period. And what happens, people will quit. Or productivity is out the door.
So while these speeds in business are sometimes needed, this leads to point number two.
Know when to say ‘when’. As the ultimate head coach in your business, you need to be measuring the heart daily, and when it hits the peak, you need to figure out a way to ease back (ease back your team that is). Or, you suffer the consequences.
How do you do this? You have to decide. Not everyone is like you. People get burned out. Some love the pace. But even your best can’t keep it up forever. Just ask the great CPA’s leaving the Big Four CPA firms after a few years. But I do think it helps to:
1. Communicate, communicate, communicate. Let your people be human. Let them vent. When working during a time when the speed seems forever high, let people be real periodically. I haven’t met anyone that loves working 60-70 hours a week and never complain. Think how that’s impacting the family life. It stinks. So let your people feel the freedom to vent their frustrations to you during these times. The fast pace will not go away, but they will feel better. And the trust level will increase between you and your staff.
2. Remind the team of the mission, the vision, the purpose. Yeah, sounds like a cliche. But there’s a reason for this madness. The breakneck speed will only last for a certain time. The staff needs to be reminded of this.
3. Pace. Yes, force a three-day weekend during these intense periods. Don’t worry, the work WILL GET DONE. When they come back, they will be refreshed and you’ll get more from them because of the expanded break. But you can’t do this for everyone at once. You’ll have to mix it up.
4. Finally, there needs to be redemption at the end. Bonus? Maybe. Extended time off? Maybe. You decide. But there needs to be that gold medal feeling when the finish line has been crossed. If not, be ready to lose some of your staff.
And related to this point, after a big push on a huge project, post-mortem can set in. Be aware of it. Some people love the adrenaline of the past few weeks/months of this fast pace. Be ready for the next big challenge for your staff and share it after the current ‘rush’ is over. That provides a sense of purpose for the foreseeable future.
In short, know your limits, and maintain speeds you and your staff can handle.
The Great Game of Business
Probably my favorite business book is The Great Game of Business by Jack Stack. It’s part biography and part how-to for a growing, struggling company. The underlying business is Springfield ReManufacturing Company based in Springfield, Missouri. In short, this is the one book every business owner should read.
I was fortuanate to meet the A-Team members at spin-off company The Great Game of Business, a company that teaches business basics like showing employees how to think like owners. And I was reminded how important it is to get your employees ‘in the game’.
In short, every owner should consider the following along these lines:
1. Every employee, and I mean every employee needs to know the purpose of the game (your business). They need to understand what success is and what failure is. They need to know the rules of play too.
2. And that leads to the next point. Teach your employees how your business works. That’s the hard part. You don’t just want people just showing up. You want them thinking like owners, and the way to do that is to …
3. Scorecard the areas where success is required to win the game. Maybe it’s maintaining a 32% gross margin on all jobs. Or getting 200,000 hitting your e-commerce site daily. Maybe it’s maintaining a 76% utilization rate. There may be more, but find the areas where you want/need measurement at all times and get the staff involved.
4. Subsequently, you have to understand what the numbers mean. Fix where needed. Entrench and get better in other cases. Bottom line, your staff has to understand the scorecards and know remedies to problems when as they arise.
Sound hard? Just start. Use the above as a guide. The key is consistency. Don’t worry about perfection. Get started and make the above part of your normal management process. Trust me it will work (unless you don’t trust your staff–if that’s the case you have much bigger problems).
February Quote of the Month
A few weeks ago, I had a great time going to a MIZZOU game with one of my favorite clients and his banker. Great steaks before and a nail-biting win afterwards. There was one downside. Leaving. Getting out of that parking lot is like doing Boston Marathon.
That night, if you were to ask me who held the single-game scoring record, I might have said:
John Brown
Anthony Peeler
Doug Smith
Willie Smith
Norm Stewart
Nope, not even close. Go back to about one month after I was born, the year of the asterisk (* thank you Roger Maris). Joe Scott scored 46 points for the Tigers on March 6, 1961 against Nebraska. In a quote from the March addition of Rural Missouri, here’s what Scott said when asked when he knew he was on:
Well, I knew pretty early. I took a couple of bad shots and they went in. So I knew something was up. It was just one of those nights.
Great quote from a great man who practices law at the age of 71 in Poplar Bluff, Missouri.
Revenue UP, Liabilities UP, Profits and Equity DOWN
LinkedIn is great, and I especially like LinkedIn Groups. I typically do not leave comments as there are too many great professionals out there. I tend to stay on the sidelines and I’m great at watching.
In one group, a member stated his 10-year company experienced revenue growth along with growth in liabilities and a drop in equity. Plus, earnings were dropping too.
I didn’t have all the facts, but here were my comments. I just couldn’t stay on the sidelines. I jumped in. My advice followed:
In many cases, but not all, as revenue grows (in a fast-growth company), so does expense, but at a faster rate. That’s because a business is typically building its infrastructure to support the revenue growth. But the infrastructure has to be built before the revenues can accelerate.
In simple case, let’s say your reveue per FTE is $150,000. You have to add the staffing before the revenue starts rolling in. So in this situation, it’s expected for revenue to grow, expenses to grow at a faster rate, and debt to grow as well to fund the losses (or growth in working capital).
On the other hand, in a business that is stable with modest 3 to 5 percent growth each year, the focus is typically profit optimization. Maximize gross and net margins while maintaning market share. Unless more cash is being pulled out of the business than is earned, these businesses should see debt decrease and equity grow, albeit modestly.
Without knowing the facts, I’d recommend you build a financial model over an 18-month time period and do it by month. Do it on an accrual basis. And forecast the balance sheet too. Then, include a cash flow report for the same time period. This will give you great insight to what has happened and then what will happen.
Accordingly,
-1- Build in 3 to 4 key drivers to drive the model (for example, a series of drivers may be hours paid vs. billable hours which will give you utilization rate … another key driver may be number of new customers/clients added per month along with attrition rates).
-2- After each month, compare actual to plan (and do not forget to do this with your drivers mentioned above)
-3- Review what went right, what went wrong, then fix where needed, especially for negative and unplanned variances (this is where your original question is answered)
-4- Repeat the process monthly (which means you do this on rolling 18-month basis)
By doing the above, you will be planning your growth and the cost for that growth. At some point when revenue growth levels off, there’s no reason why debt levels cannot decrease and your equity grow assuming you do not pull out 100% of your annual earnings each year.
If you do the above for several months and continue to see problems, then you may have a problem with your business model or your marketing activities.
Domain Names – An Alternative to You-Know-Who
So you need a domain name, and you are like me, you want to stay away from a certain company. Some of my LinkedIn connections provided this list that may give you some ideas.
Remember, do your homework.
1and1
Dotster
Got-Hosting (aka Green Olive Tree)
Hostgator (probably the favorite)
Bluehost
NameCheap
The Wall Street Journal featured B2B CFO® as experts in cash flow management. 
