Financial management

I am just completing the teaching of two summer courses in Financial Management at Concordia University. It's time for their final exams so I'm now thinking about what are the most important lessons to learn for future business managers and entrepreneurs. Or alternatively, what do most entrepreneurs neglect in the management of their businesses?

Most of us focus regularly on the income statement - revenues, gross margins, expenses and the resulting profits. But we often neglect the management of our balance sheet - inventory, receivables, return on assets, and the short and long-term sources of funds. These issues can all have significant impact on profitability and the long-term value of the enterprise.

So I will try to emphasize the importance of regularly reviewing performance of assets and liabilities in addition to the more obvious and intuitive issues of sales and income. How does balance sheet performance compare to prior years? the plan? or the industry averages?

Can we improve turnover on inventory and receivables without losing sales or diminishing service levels. Can we extend payables and get additional short-term financing without hurting our credit ratings or adding to our costs? Are we making good use of long-term debt to add financial leverage and improve the return on our equity investment?

All important issues for effective financial management.

Mysteries of human behaviour

I've just returned from an interesting trip to Sept Isles and tour of the Quebec North Shore. Sept Isles is on a large circular bay protected by seven islands (surprisingly) and is a young, prosperous industrial town. Quite unremarkable as a tourist destination.

But it has one characteristic that seems to be entirely unique to the population of Sept Isles. The town has two very popular Tim Horton's coffee shops and strangers cannot help but notice that absolutely everyone takes their coffee in the familiar "roll-up-the rim" paper cup with a plastic straw! They attempt logical explanations that it keeps the coffee from spilling out the flip top opening while driving, but there is really no explanation for it becoming unique to Sept Isles.

It seems to me a useful reminder that human behaviour cannot always be explained, predicted, understood or managed. Just accept it and work with it. Like the counter staff at Tim Horton's in Sept Isles - just punch a hole in the top and give them a straw.

The relentless pursuit of knowledge

It's not trivial. One thought or idea leads to another.

I mentioned Dale Carnegie's original successful book written in 1936 and wondered if he was related to the famous American industrialist named Carnegie. Maybe he was just a lazy rich kid with the time to philosophize and write about "winning friends and influencing people". How to find out? I thought of Wikipedia, partly inspired by a recent article on Wikinomics in Canadian Business by Don Tapscott, Canadian philospher,writer and commentator on technology trends.

So I searched Google (of course) to find the Wikipedia entry and learned the following, plus a bonus marketing tip!:

Born in 1888 in Maryville, Missouri, Carnegie was a poor farmer's boy, the second son of James William Carnagey and Amanda Elizabeth Harbison.[1] In his teens, though still having to get up at 4 a.m. every day to milk his parents' cows, he managed to get educated at the State Teacher's College in Warrensburg. His first job after college was selling correspondence courses to ranchers; then he moved on to selling bacon, soap and lard for Armour & Company. He was successful to the point of making his sales territory, southern Omaha, the national leader for the firm.[citation needed]
Perhaps one of Carnegie’s most successful marketing moves was to change the spelling of his last name from “Carnegey” to Carnegie, at a time when Andrew Carnegie was a widely revered and recognized name.

More fascinating facts, or useless trivia. You decide.

Summertime

Two long summer weekends and two short weeks every year at the end of June. (Unique to Québec?) Followed by the so-called "construction holiday" where almost everyone leaves for the last two weeks of July. Hard to be productive with clients or any other business partners during this period.

Should be a good time for blogging, but other summer attractions have more appeal. All of which is to admit I don't have much new to say.

Some more progress on summer reading and my reviews for your consideration:

• Crime and Punishment, by Dostoevsky. A classic on my "must read" list. Written in the Russia of the 186o's and considered the original psychological murder mystery. Intriguing and very different from the modern murder mystery as it is told primarily from the point of view of the murderer.
• How to Win Friends & Influence People, by Dale Carnegie. One of the originals (consider also Think and Grow Rich by Napolean Hill.) written in the 1930's and still worth a read. Not so serious or so slick as the current crop of self-help books that are so effectively mass marketed. Adds some perspective to the basic skills required to be effective in working with other people.

I've also agreed to teach two summer courses in Financial Management at Concordia so I'm reviewing the current textbook, "Principles of Corporate Finance" by Gitman and Hennessey. The principles haven't changed in the thirty years since my MBA and the first time I taught the course, but the text is well done and covers the elementary to the advanced topics.

Happy summer reading on your own list.

Back to Blogging after golf

Too much time has passed since my last posting. Apologies to any avid subscribers, but I expect my absence was hardly noticed. My feeble excuse was being away for a dynamite golf and family visit in beautiful BC.

It was easy to be distracted by the spectacular scenery of BC at it's best in May/June. Lush green hillsides rising to snow-capped mountains reflected in the clear blue lakes. And we experienced a perfect father and son day at Whistler with a morning of spring skiing on Blackcomb and an afternoon of golf at Nicklaus North with a black bear on the 7th tee and waterskiers around the 17th green. Not to mention the outstanding sushi feast at Whistler Village.

So back to business after the reminder of how it's like golf. As my father would say about baseball "It's not good enough to swing and hope". You have to study, practice, and do it a lot to succeed. Watching it on TV or reading about it may help a little, not a lot. Better equipment is not the easy answer. Keeping score is the only way to really know how you're doing. And I'm sure there are other ways business is like golf. Material for a future Blog. Stay tuned.

Meanwhile enjoy the summer weekends, golf or no golf.

Essence of Customer Service

A quick comment after another demonstration of what distinguishes good customer service.

I've always said the essence of good customer service is simple; not easy, but also not complicated. And for it to be reflected consistently on every customer contact is the real challenge for management. Instead of trying to explain it, just think of leaving every customer with a positive impression of the company, every time.

TD Waterhouse does that for me. As a discount broker that I use online regularly, I occassionally need to talk to them or meet someone in their office. Always prompt, personal, polite and efficient. The real test is when a problem arises. A transfer request that didn't happen as promised caused me to call today. Even though I started with a complaint, it was quickly corrected and I was again a satisfied customer. Congratulations to TD Waterhouse for continuing to impress me with excellent customer service. I'm a tough critic, but they are the best among all the large companies I know.

Essence of entrepreneurship

I had lunch yesterday with a client and friend who represents for me the essence of entrepreneurship. (He is too modest and discrete for me to mention his name here.)

In my opinion, the essence is to combine the strength of a marketable expertise with the ability to think and act strategically. In his case, he has a very high level of knowledge and experience in the design, build and maintenance of computer data centres. He initally worked for another a specialist in that field then left to start his own business. Over time he successfully positioned his company as the recommended service centre for the industry's leading manufacturer; grew to a size that exceeded his own management abilities; introduced a new partner and executive management team; accepted a new role in the company that leveraged his unique expertise and skills in developing customer relationships; and managed to re-position the company as a major project contractor to design and build large computer room installations from its origins selling and servicing basic hardware.

Many entrepreneurs I work with are equally competent and dedicated to their area of technical expertise but much less capable of managing their business strategically. Others may have the education and experience to manage and think strategically but have little to offer in unique expertise.

Success flows more easily for those that have both.

Maintenance time

After a long weekend there is extra urgency to get a week's work accomplished in the remaining four days. And this weekend I'm away for 2 weeks to enjoy Beautiful BC with friends and family so even more pressure .

It's a good time to remember the importance of maintaining the foundation - physical, financial, friends and family. Too much focus on business and career goals can easily leave no time for those other important elements of a successful life.

Weekends and holidays should be protected from work intrusions to allow quality time to be spent on those other priorities. They all add to the solid foundation that will support you through the inevitable challenges up and down the business cycle. Physical and mental strength, financial security, and the refuge and counsel of friends and family will help you weather the storms of economic adversity. If neglected, they will not be there to respond in times of need.

So take the time for maintenance. Sometimes, the work can wait.

Happy Birthday to me

If you're here on Friday morning May 18th, I've gone golfing. Happy Birthday to me in case you forgot.

If you found this Blog through my e-newsletter on "E-Business opportunities with Web 2.0" (see www.directtech.ca/ebusiness_2007.htm) then you'll appreciate the beauty of online applications like Campaigner (www.campaigner.com) which sent the newsletter while I was golfing and directed you to the DirectTech Solutions website or the Blog. If you click on the Google ad links I might even make nickel while I'm golfing.

Now that's what I love about the Internet!

Happy Birthday to me

If you're here on Friday morning May 18th, I've gone golfing. Happy Birthday to me in case you forgot.

If you found this Blog through my e-newsletter on "E-Business opportunities with Web 2.0" (see www.directtech.ca/ebusiness_2007.htm), then you'll appreciate the beauty of online applications like Campaigner (www.campaigner.com) which sent the newsletter while I was golfing and directed you to the DirectTech Solutions website or the Blog. If you click on the Google ad links I might even make a nickel while I'm golfing.

Now that's what I love about the Internet!