Great piece by Ryan Caldbeck, CEO of crowdfunder CircleUp, on using convertible debt to grow early stage consumer product companies. Shorter version: It helps defer valuation conversations when you have solid revenue, but the current revenue does not reflect the company’s potential. For the full article, click here.
If you are interested in investing in early stage consumer product companies, I highly recommend CircleUp. They have a number of great investment opportunities.
As a middle market CFO, one aspect of my past experience at large corporations that I miss is the ability to develop talent throughout the accounting and finance team through job swapping and promoting from within. In fast growing middle market businesses, there is ample opportunity for career development, but it stems from the growth of the company and the need for each person to wear multiple hats. In larger corporations, you need to rotate people through different positions to diversify their skills, improve operations and prevent boredom. In middle market companies, it’s not as easy or as necessary, but that doesn’t mean you shouldn’t do it.
If there aren’t enough positions within your accounting and finance team to make it happen, consider temporary job swaps with other departments. Your financial folks might bring a new perspective to the sales or operations divisions and vice versa. It will promote better teamwork, develop your talent pool and keep people engaged, just like it does at large corporations.
The chill in the air, the smell of brats and burgers wafting through crowded parking lots, the excitement on the painted faces of rowdy fans… it can only mean one thing: It’s time to kickoff Budget Season.
The quarterback sneak, the triple option, the end around, the hail mary and the punt – these are all moves managers make throughout the budget approval process with varying degrees of success.
What tools do you use for budgeting? Do you rely solely on Excel spreadsheets or do you use a more sophisticated budgeting software such as Microsoft’s Management Reporter or do you use a hybrid approach such as Vena Software? The advantages of going beyond Excel include the ability to manage workflow throughout the process, to make your individual budgets more consistent and structurally secure and to roll them up easier for automatic visibility to the big picture. Most companies start out using only Excel spreadsheets and eventually evolve to a more structured format.
Regardless of the software you use, your budget should typically include the following components:
(1) A schedule of dates and deadlines that clearly spells out who is responsible for what and by when.
(2) Payroll by employee including open positions and additional headcounts – this schedule should roll forward into the budget to calculate labor costs and benefits and may also be used to allocate expenses between departments.
(3) Fixed Assets and Capital Expenditures – this schedule should roll forward to the P&L for depreciation and to the Balance Sheet/Cash Flow Statement for capital expenditures.
(4) Comparisons to current year and long term plan.
(5) The aforementioned “Cash Flow Statement” should be part of your budget.
I have to get on a plane now. What other components should be built into a good budget?
A new study released by Ernst & Young examined 539 Private Equity deals that exited from 2006 to 2012. These are my key takeaways from the study:
Here is the link to the full study: EY PE Study 2006 to 2012
A few accounting and finance jokes….
What did the accountant use for birth control? His personality.
What do you get when you cross an accountant and a jumbo jet? A Boring 747
Things overheard at a recent CPA mixer:
“With friends like mine, you need an allowance for doubtful accounts.”
“I consider myself a recovering CPA.”
“I’m a CPA. A Certified Party Animal.”
“No, Irving. Obamacare’s individual mandate doesn’t have anything to do with you going out to dinner and a movie by yourself.”
Please share your favorite accounting and finance joke in the comments section of the blog or the LinkedIn discussion group.
A few weeks ago I blogged about the Microsoft Excel tips I had learned at a meeting of the Los Angeles chapter of the Institute of Management Accountants. The presenter at that meeting, Jeff Lenning of Click Consulting, just notified me they have converted the content of Excel University Volume 1 into an interactive, self-paced training format, and it is now available through their online learning management system (LMS). Click here for details.
The original blog entry was quite popular and generated many comments on the blog and in various LinkedIn discussion groups as well as many clicks through to the Click Consulting website. As a thank you, Click Consulting has offered me the opportunity to give away one free enrollment in the new Excel University Vol 1 online training, a $399 value (currently on sale for $299). To enter, simply join the LinkedIn Discussion Group “Middle Market CFO” on or before 7/31/13. One member of that group will be chosen at random on 8/1/13 and the winner will be announced right there, in the Middle Market CFO discussion group on LinkedIn. Good luck!
Many highly intelligent employees who are skilled and passionate in their area of expertise will glaze over like Jessica Simpson listening to Robert Plant when you try to talk to them about financial information. The following tips will help you talk about finances so non-financial management and staff will listen and understand.
Following these tips may not help you climb the stairway to heaven, but they will make you a more popular CFO. More importantly, it will help you keep your company’s non-financial employees better informed so they can do their jobs more effectively. If you want an idea of how nonsensical financial jargon can sound, check out this hilarious random financial phrase generator. If you like this blog post, please share it with your connections and discussion groups on LinkedIn, or on Twitter or Facebook using the icons below.
I am a huge fan of football and most other popular sports, but my favorite televised sport of the year is the Tour de France. It’s a grueling three-week, 2,000 mile test of skill, stamina and teamwork that often comes down to who wants it more. It’s beautiful to watch the sweeping helicopter views of the peloton careening through switchbacks on the side of a gorgeous mountain or splitting a roundabout in a quaint European village before weaving back together at high speed like a school of fish. On top of all that, it’s steeped in tradition, the fans are nuts, the crashes horrific, the announcers (Phil Liggett and Paul Sherwin) are British-accented poets, there’s something for everyone really.
Another nice feature is due to the time difference you can watch it live each morning in California before you start your work day. This got me thinking about what lessons I could learn from the Tour de France and apply in my role as a CFO. Here are three:
Remember these three tips and they’ll be kissing babies and throwing soft cheeses on the Champs-Élysées in no time.
Inspiration can come from many places. For me, each July, it comes from the Tour de France. What inspires you?
It’s really just removing the first of two obstacles that stand in the way of crowdfunding. The 2nd obstacle, which could get lifted later this year, would be to lift the accredited investor restriction. At that point, private companies could raise equity by advertising to a wider audience through crowdfunding websites such as www.CircleUp.com and www.Fundable.com. This will make it easier for small businesses to raise the capital needed to grow and stimulate the economy, but it could also open the door to fraud and high-risk investments. What do you think will be the impact of crowdfunding?
Unused Line Fees or Commitment Fees
Everyone understands loans have an interest rate applied to the balance or the amount borrowed. Not everyone understands business lines of credit generally come with ‘Commitment Fees’ or ‘Unused Line Fees’ applied on the amount of the line of credit not borrowed. It is generally a relatively low rate compared to the interest rate, and it is basically the fee the bank charges to have the amount of the line of credit available for you to borrow if and when you need it, even though you are not currently using it. Middle market CFO’s should understand the following 3 points:
(1) They may be negotiable.
(2) When comparing 2 or more loan offers, include the unused line fees in the analysis. The difference may be substantial enough to tip the scales to one loan versus another. If so, remember point #1.
(3) When determining the amount of the line of credit, include the unused line fees in the analysis. While it may be best to have more credit available than you think you will need, understand the cost and factor it into your decision.
Although the reason the banks charge unused line fees is understandable and the cost is relatively small (especially compared to the amount of interest you might be paying on the portion of a term loan you don’t need), unused line fees are often a source of annoyance to many business owners and CFO’s who simply can not get used to the idea of paying the bank a fee on money they are not borrowing. What types of fees and business expenses are the most annoying to you?
The Middle Market CFO 