CEO Chief Encouragement Officer - Jan 30, 2011
Posted by: David L. Odom in Articles
Part 1 – What does it take to Encourage?
I noticed the title of a person who emailed me recently and although he was the CEO of the organization, he used the term Chief Encouragement Officer as his title. It struck me that many times the Chief Executive Officer of the company does not do the things that they should do to ensure that they encourage those serving in roles that support the organization.
Roget’s Thesauruses lists the following definition to the word encouragement:
noun
- Something that encourages: inspiration, motivation, stimulation.
- Something that causes and encourages a given response: fillip, impetus, impulse, incentive, inducement, motivation, prod, push, spur, stimulant, stimulation, stimulator, stimulus.
That definition tells us that to encourage means to inspire, motivate and stimulate, to prod, push or spur on. How many times as CEO’s do we in reality invoke these characteristics in those we lead in the organization? Not only do they need to be inspired, motivated or stimulated, but they need to be inspired to do what is right, best and most valuable to the company.
We can also inspire or motivate someone to leave the company if we are not careful how we communicate and what we communicate to them. Many times we actually discourage, de-motivate or stimulate the wrong behavior. It is important that we understand the role of encouragement in being the CEO. We are visible to others, expected to lead and communicate effectively and to be an example that inspires.
The Missing Ingredient - Jun 23, 2010
Posted by: David L. Odom in Articles
It has been a guilty pleasure of mine to watch some of the Food Network shows on cooking with my wife. It is always interesting to see how chefs can make such an amazing dish out of things I could find in our kitchen. The most fun shows for me are the reality shows like Chopped or Next Food Network Star. These chefs are put in contests with either strange foods or missing ingredients, which causes either masterpieces or disasters in cuisine
Seattle sports teams seem to continue year to year with missing the ingredient to take them to the championship games, much less the playoffs. The running back, offensive line and a healthy quarterback have all been missing for the last few years for the Seahawks. A group of strong pitchers and consistent bats to win those games and the division has eluded the Mariners since the 116 game winning season,
In the last year I have worked with two companies that are 12-24 months into a major accounting and ERP software conversion that are logistical and financial nightmares. The software programs were nationally recognized solutions in their respective industries. The management of each company vetted the program, reviewed the agreements provided by the Value Added Reseller and set out to convert from their existing software to the new better, faster, cost savings solution.
In the first company the total investment has been over $250,000 for software and consulting time. The project was not ill conceived but not well planned or converted. The conversion was put into the hands of a hardware / network consultant who had never converted any accounting software systems. This person charged the company over $50,000 directly and resulted in the VAR consultants to charge an extra $100,000 in fees. The company had three different controllers during the conversion period and the turnover made everything cost more. The company pulled the plug on the conversion and reverted to the prior system. They own the software and pay $5,000 per month to the finance company as a painful reminder of a poorly managed conversion.
The second company is 18 months into the conversion, $100,000 over the original conversion budget and struggling to get their accounting system to report the basic financial information, much less enjoying the much touted enhancements. The accounting staff has not turned over, the support was directly from the software company with no VAR layer of consultants and yet the result is painfully similar. The project cost has exceeded $250,000 and the total cost will continue to rise. The support from the software company has been fragmented and continually put the blame on the buyer of their product. Their consultants have complained about the “new version” that was released just after the purchase was made. This has put the company on the “bleeding edge” of technology not the leading edge. A lawsuit may result from this company as the management is extremely frustrated.
In both of these companies either there was no quarterback to lead the team through the conversion or the person in the seat was not qualified for the job. The missing ingredient made for a bad recipe and costly result.
A Stroke Of Luck - May 11, 2010
Posted by: David L. Odom in Articles
Exit Planning by Default
My father was sixty-seven years old that bright August day in 1984 when he went out on his office patio at work to look at the flowers. Suddenly he felt numb on his right side, his arm, his face and leg all stopped working in coordination with his body. He went to sit on a patio chair and nearly fell into it. His vocal cords were also impacted by this stroke, he could not yell for help. Slowly his mind began to search for what this would mean to him, his family, his career and his business.
When he arrived by ambulance at the nearby hospital he was wheeled into the ER. Immediately he was surrounded by medical staff adding lines in his veins and hooking up monitors for his blood pressure and heart rate. Quickly the attending physician walked in, greeted him as Mr. Odom and asked what my father’s occupation was during his career.
Through slow and painful speech he said “That is Dr. Odom, I AM a dentist”. The good doctor asked when he stopped practicing dentistry. My dad told him “About 10:25 this morning”. The ER physician looked straight into my father’s eyes and said, “At your age, you should be retired!”
Exit planning at age 67 does not usually include a side trip to the ER room with a loss of mobility, speech and an increasing fear that life as you know it, is over! This is not the planned exit of turning your business over to the chosen successor and taking some time to enjoy the good life.
Dad had his first heart attack at age 45 when I was just a kid of 5 years old. Now as I had begun the professional relationship of being the CPA for my father’s business, he was lying in a hospital again. This time he was wondering if his days as a respected dentist, business leader and mentor were over.
Weeks later he was released from the hospital and slowly and fully recovered from his stroke. The next conversation we had was about beginning a plan to find a successor for his dental practice. Enough talk about retirement, now it was time to get on with a plan!
A few years later I had a dental client who bought a practice from the estate of a dentist, whose life did not survive his Exit Plan. The successor dentist bought the practice for a fraction of the price negotiated earlier, prior to the sudden death of the selling practitioner. The former dentist waited too long to plan his exit and it cost him his life and his heirs several hundred thousand dollars.
These were some of the earliest experiences that I had with Exit planning and execution. The hard lesson of seeing my father nearly die from a stroke working late into his sixties ended with a bit of luck and answered prayers.
We engaged a dental practice transition firm to let recent graduates from the UW dental school know that my father was looking to sell his practice. After interviewing s....
Posted by: David L. Odom in Articles
My wife and I have just completed giving our rental house a complete makeover. The good news is we came in 20% over budget and 33% behind schedule. The bad news is we worked too many hours to say that we enjoyed the job. The concept was we would do the work we knew how to do ourselves and hire the contractor for the jobs we would not be able to do without violating several laws and creating more problems than we solved. I have helped finish basements in two of our homes and I have learned to frame, sheetrock, wire, plumb, paint and a few other trade skills. Not bad for a soft handed CPA. What I learned is that there are some people that God created with talents to do things like mudding and sanding sheetrock. I swore after the first time of trying to mud, tape and sand some walls in my boys future bedroom I learned that I was not talented or interested in doing that task again. On the other hand, I really enjoy electrical, low voltage and home theatre wiring. I found that the challenge is one that I enjoy. My wife is a saint, trooper, cheerleader and wonderful support. The fact that she did not bury me deep behind the walls of this last project is a testimony to her commitment for “better or WORSE”! We laid subfloors and tile, painted every surface within the house, installed doors, hardware, new electrical switches and outlets, light fixtures, sinks, vanities, toilets, hardware and refaced the fireplace. We ARE still married, ARE still talking to one another and ARE committed to never doing that much remodeling ever again. We spent more time in Home Depot, Lowes and the rental house then we did in our own home over the past 120 days. The house is listed for sale and now we are looking back on our DIY project with pride and lessons learned. How many of you are performing Do It Yourself tasks within your own business? Doing more than you should, because it saves money, despite the true cost to you or your company. My wife gave me some very sage advice during the phase of installing new trim in every inch of the house. I was thinking I would paint all the trim. I have some experience painting, in fact I owned a painting company that helped fund my college education. She told me to subcontract the job to a professional painter. I had convinced myself that I had the time, talent and could save money by doing it myself. Following her request I got two bids to caulk and paint trim and doors. The second bid was 60% less than the first one and that contractor was recommended by someone I trust. It went against everything in me to hand this task and our money to a painting contractor. By the time the contractor finished the work, in a fraction of the time I would have taken, with superior results than I would have achieved I came to appreciate the wisdom of my wife. She knew that my time was better spent running my business. Despite the “talent” I possess in painting I w....
Posted by: David L. Odom in Articles I learned this expression early in my life, not as a farm hand or even by having cows in our suburban yard, but as a CPA. Although dairies have been plentiful in the greater Puget Sound and most other parts of our country, I have only had the opportunity to saddle up with a stool and bucket once in my life to milk a cow. Here are a few of the warnings I was given by someone more familiar with the job: There are comparisons between over-milking a dairy cow and a “cash cow”. If your company has produced buckets of cash and you have been dutifully clearing the corporate udders, you may be doing harm to the company. Just like over-milking a cow can cause stress on the animal that weakens it, so does removing the cash and profits from a company. Some of today's cows are unnaturally milked dry up to 3 times a day. Did you realize that the life of an average cow is shortened by 4/5 (80%) due to excessive milking and calving? That means it would live a natural lifespan 5 times greater if it was not treated to these excessive stresses. Your company also produces milk, in the form of cash. Cash is the key co....
Posted by: David L. Odom in Articles
Many golfers calculate their handicap, with the most analytical also counting their putts per round. A friend of mine had the lowest average putts per round one year on the PGA tour – lower even than Tiger Woods. That sounds very impressive, but my friend didn’t win any major tournaments that particular year. He retired from the pro tour a few years later. Though one element of his game was at the top of his profession, helping him win his share of tournaments over his career, several other metrics were not operating in concert to keep him in the game. What is it about life that we keep tabs on everything from our IQ, credit score and cholesterol level to our investment portfolio annual return, miles per gallon and Mulligans? Everything that we consider important in life and business is measured by a metric or key performance indicator (KPI). Do you care more about your total weight or percentage of body fat? Both are important. But if your body fat percentage is low, you are willing to carry more weight due to muscle mass. Some factors give us one degree of perspective, but without others we still don’t know the total picture or how -- or why -- it needs to change. Metrics are important in life, school, health and sports. How much do you use them in business to determine what is going well and what needs to change? Here’s how SearchCRM.com defines a business metric: A business metric is any type of measurement used to gauge some quantifiable component of a company's performance, such as return on investment (ROI), employee and customer churn rates, revenues, EBITDA, and so on. Business metrics are part of the broad area of business intelligence, which comprises a wide variety of applications and technologies for gathering, storing, analyzing, and providing access to data to help enterprise users make better business decisions. Systematic approaches, such as the balanced scorecard methodology, can be employed to transform an organization's mission statement and business strategy into specific and quantifiable goals, and to monitor the organization's performance in terms of achieving those goals. Current ratio, debt versus equity and gross profit by inventory....
Posted by: David L. Odom in Articles “Primping the Bride” A few months ago as a daddy I was able to walk the most beautiful bride down the aisle. My 24 year old daughter got married and I had the honor to escort her to the groom, and give her away with our blessings. From the time they are born we, their parents think about the day our children will get married and try to prepare them for that day. We teach them values, protect their honor and pray for the spouse that one day will become part of our "extended family". My prayers were answered and I not only got a new son-in-law, my daughter married a wonderful man. Posted by: David L. Odom in Articles
Working capital (also known as net working capital) is a financial metric which represents the amount of day-by-day operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. A company can be endowed with assets and profitability, but short of liquidity, if these assets cannot readily be converted into cash. (Definition from WikiAnswers.com) Collectability is also critical to consider. If you have notes or accounts receivable listed as current assets that will NOT be collected within 12 months they may be computed as working capital but the liquidity may not be realized. Inventory must also be managed to make sure it is convertible to cash though the sales process. If it is not sold, excess inventory will accumulate. The result is that inventory will not become converted into cash and the value of this element of working capital can not be realized. Control is the key to ....
Extreme Makeover Confessional Of A Do It Yourself Contractor - Apr 21, 2010
Do Not Over Milk The Corporate Cash Cow - Nov 20, 2009
Your Iq Your Golf Handicap And Your Cholesterol Score Why Should You Care - Nov 19, 2009
Primp The Bride How To Prepare Your Business For Sale - Sep 16, 2009
When we think about our businesses the thought of selling is sometimes put off. We may wish to purge the business from our lives at some point due to stress, but usually they are also our "babies". We nurture them, mold them and hope one day a suitor will come to pay the price to take control of our company.
A couple of years ago I spoke to a large group of business owners in Cabo San Lucas on the topic of "Primping the Bride", in terms of preparing their business for sale. I used the analogy of how the bride takes hours or even days to prepare herself for her wedding day. Her nails, makeup, hair, just the right gown, shoes, veil and even her undergarments, all get fussed over and chosen to be the "perfect" one for her wedding. Business owners also need to take time to prepare their company so that it looks its best, when the suitors come a calling.
Preparation for the sale of a business entails making sure all the legal issues are settled, agreements located or created, accounting records cleaned up and prepared for the auditors, assuming audits are not occurring currently. Many other decisions weigh on the owner as how to make sure the "courtship" of the suitor does not leave the "bride" at the alter.
The buyer's due diligence teams will scour the books, review the inventory valuations, assess the internal controls, competition and systems, processes and staff you have assembled. It will be the time when appearances will be judged, but your business will be scrutinized more thoroughly than the human bride ever will be.
As I was helping one client prepare their business for sale, I insisted that they took a physical count of the entire inventory and then made sure that each item was accurately valued. We found that the actual value of the inventory was worth much more than the company had been carrying on their balance sheet. The effect of this change also increased the profits as we adjusted the inventory upward. The cash the seller was able to derive from the ultimate sale rose substantially due to both of these changes, as it increased the EBITA or cash flow derived from the business, as well as the physical assets.
Where are you with respect to your business? Have you started the process to "Primp" your company? If you need help making sure that the most critical items are attended to so that your trip down the aisle doesn't end up without the marriage (sale) taking place, let me know.
My years of experience and that of my B2B CFO® partners can assure you that we know what needs to be done for the suitor to buy with confidence. Your company will not only look its best, but the infrastructure will be in place to maximize the cash flow now and demonstrate that the value supports the asking price.
Working Capital The Life Blood Of Any Business - Jul 30, 2009
Working Capital (WC) is as essential for business operations of your company as blood is essential for the operation of your body. You and your company can not live without either blood or working capital. You will be in serious danger if you don't have enough in your system. Cash is critical and the King, but working capital is the measure of liquidity of assets that can be converted into cash within an annual operating cycle.
Without the ability to convert assets to cash via the sale of inventory, collection of accounts receivable or short term notes, liquidation of investments or other form of conversion the working capital will not become cash.
If assets or liabilities are considered current (meaning convertible within 12 months for creation of cash or use of cash) they are taken into account for computing working capital. The net excess of Current Assets minus Current Liabilities equals working capital. If Current Assets minus Current Liabilities yields a negative number, there is no working capital (there is a deficit of working capital).
What does this mean to business owners and what can they do about it? The seven Cs of working capital management are listed below:
Classification is important for accurate financial statements and the computation of working capital. Make sure that all non-current assets AND liabilities are reflected as such. Otherwise, you may be overstating or understating working capital and this may work against you in the computations your banker may use.
Capitalization may be one of the most significant considerations regarding assets in calculating working capital. Sometimes assets are expensed when paid and yet they actually benefit the next 12 months, like insurance premiums. If the prepaid insurance is not capitalized and the expense pro-rated over 12 months, the current expenses may be overstated and current assets understated. This will result in an UNDERSTATEMENT of working capital and the prepaid asset may be overlooked by your banker.
Computation of working capital properly is essential to know if you have enough to operate your business with the cash you will need. Improper computation with inaccurate financial statements can KILL you or lead your banker to think you don't qualify for expanding your line of credit.
Creation of working capital requires either infusion of capital as equity or long term debt, the sale of fixed assets or increasing profitability. Profitability should be your focus if you don't wish to raise equity capital, increase your long term debt or liquidate your operating equipment.
Cease the risk of working capital disappearing from your balance sheet. Employee theft (of either: cash, inventory or time), writing off uncollectible receivables (from under-managed accounts or sales to the customers who are not credit worthy) or operating losses (not making a profit) all consume working capital. Guard your working capital.
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