The Frustrated CFO

MONEYNEWS: The Shit Will Hit the Fan Soon - Didn't I Say So?

For a really long time now, I've been explaining (and so have other realists) that the overpricing of pretty pieces of paper (aka stocks, bonds, treasury bills, etc.) caused by the gambling games of cocaine-fueled, high-strung nitwits in high-rise brokerage offices and delusional day-traders glued to their hand-held devices has nothing to do with real production values, revenue growth, profit generation, and economy improvements.  

It's shocking to me that people seriously accept the stock market "rally" of the past few months as a sign of tangible fiscal gains. The same goes for the rise in housing prices resulted from the unprecedentedly low mortgage rates artificially kept down by the US Treasury.

Don't you people understand that, just like with a terminal patient, this is a temporary remission before the downfall?  You cannot take a candy wrapper that worth 1 cent and say that its price is $430 just because there is a schmuck who is willing to shell out that kind of money for it and hope that there is another idiot out there who will pay $450.  Any, more or less logical, person should understand that the real value behind the candy wrapper is still 1 cent, regardless of how much money you pay for it.  But apparently the general public is severely lacking common sense and logical aptitude.

You know what else they are lacking? The disposal income - the money to spend, the moolah to throw around, the dollars to buy the products of the very companies, whose stocks comprise these people's pension and college funds.  If the consumer market contracts, how can companies generate revenues?  How can a nation experience a recovery, when 99.9% of it is getting poorer and poorer by the minute?

This issue of the constant reduction of consumer spending is at the core of the economic disasters ahead of us.  And apparently the public-stock billionaires, whose wealth is so easily added up and compiled into lists in the Forbes's offices, have already caught up with the reality - they are in high-gear disposal mode.

Please-please read this MONEYNEWS' article about Billionaires Dumping Stocks.  In addition to listing the relevant verifiable facts, it also refers readers to the voice of reason - an economist with an impeccable prediction record who foresees a market adjustment as dramatic as 90%!!!  And if you want a really full picture read the other articles linked below as well.   

Related articles

'Aftershock' Author Robert Wiedemer to Moneynews: Investors Buy Into Fed's '100% Fake' Recovery

Billionaires dumping stocks like they're going out of style (including bank stocks).

Quote of the Week: Why The Likes of David Foster Wallace Have No Substance

"The reason why so few good books are written is that so few people who can write know anything."

                                            Walter Bagehot

                                             1826-1877

Note from The Frustrated CFO:

I feel a kinship with Walter Bagehot.  He was a businessman, essayist, and journalist.  While his main focus lied in the economy and money, he also wrote extensively on government, politics, literature, and culture.

Quote of the Week: The Accounting Blues

The Frustrated CFO's Preface:

From time to time I feel a need to come back to the discussion of an emotional burden carried by the accountants who find themselves in the unfortunate position of recognizing and reporting business losses.  And I feel absolutely justified doing so, because it is one of the most painful professional experiences.  Moreover, it is a reality many small-business CFOs and Controllers have to face with a persistent regularity.  Less than three months ago, for example, I wrote about the effect of losses on bosses (upon closing of the second quarter by the companies with a calendar fiscal year).  Nobody ever mentions how hard it is for us to be the messengers of news that may translate into budget cuts, layoffs, credit line recalls, and possible termination of business.  So, I feel obligated to talk about it.

Imagine my surprise, when I discovered a depiction of the familiar sentiments in a Booker Prize winning novel about one woman's wasted life - Margaret Atwood's The Blind Assassin.  I don't know whether Ms. Atwood is acquainted with somebody who shared their experiences with her, or she is that good at getting inside her characters' heads and imagining how it would feel to someone in real life.  What matters is that it's very accurate.  So, here it is:

"Two and two made four...  But what if you didn't have two and two?  Then things wouldn't add up.  And they didn't add up, I couldn't get them to; I couldn't get the red numbers in the... books to turn black.  This worried me horribly: it was as if it were my own personal fault.  When I closed my eyes at night I could see the numbers on the page before me, laid out in rows on my square oak desk... - those rows of red numbers like so many mechanical caterpillars, munching away at what was left of the money.  When what you could manage to sell a thing for was less than what it paid you to make it... - this was how the numbers behaved.  It was bad behaviour - without love, without justice, without mercy - but what could you expect?  The numbers were only numbers.  They had no choice in the matter."

                                                             Anchor Books edition, 2000, p. 204

                                                                

Arts & Entertainment by the Numbers, Part I - Books

I frequently say that people who really know accounting and finance don't care what to count, analyze, fund, etc. I obviously include myself into this group - not to toot my own horn, but simply because my career has proved that I can successfully plunge into any type of business in any industry.  

The essential prerequisite for this level of expertise is a combination of extensive knowledge of fundamentals with the propensity for applying general principles to specific situations in a blink of an eye.  There is also a very special knack that plays a crucial role in the making of a universal financial expert: a natural ability to convert everything into monetary units. 

I do it almost automatically, almost with everything, sometimes to a fault.  However, being a cultural glutton, I revere creative endeavors too much to crudely slap number tags onto them.  It's only somewhat recently, as a result of certain developments in my own life, that I became curios about various numerical aspects of arts and entertainment.

Of course, there are some prices, which are simply common knowledge.  And I had some pretty good ideas about a few others, based on my financial acumen and cultural intuition.  But I must say, some of my findings turned out to be simply bewildering.

I. Books

The PEN Award recipient Grady Tripp (Michael Douglas's character in Wonder Boys)says that the only reason the University's Chancellor fell in love with him was because "she was a junkie for the printed word.  Lucky for me," he continues, "I manufactured her drug of choice."

I have to say that if there were such a thing as Arts Addictions Anonymous, I would probably end up, together with the Chancellor, in the "books group" before they moved me to the Theater and Cinema rehabs.  The question is, how many other people would be there with us?  Here are a few sad  numbers about my first love, the written words.

According to various publishing specialists, if an advance of $3,000 is paid to a book's author, the life-time sale of 10,000 copies is considered to be a success.  Most debut literary story collections sell no more than 2,000 hard-cover copies.  For the first literary novel this number falls into the range between 3,000 and 7,000.

An average professional-interest book sells about 5,000 copies in its lifetime.  This includes e-Books (which, as you know, can be easily stolen).  If the author hires, naturally at his own expense, a book agent and a PR firm, the sales may go up as high as 12-13 thousand copies.  

Just for the sake of the statistical integrity, let me remind you that the population of this country is 315 million. 

Now, here come the dollars.  This is derived from my own first-hand experience: an author's royalties range anywhere between $1-$4 per sold book.  So, if your book has sold 5,000 copies, you can hope to generate somewhere between $5,000 and $20,000.   Astonishing, isn't it?  We are talking about the payoff on the multi-months (sometimes years) struggle.

This explains why 99% of American authors have day jobs.  Most literary writers with respectable names teach creative writing classes in Universities.  One of my idols, the late Kurt Vonnegut, taught at the University of Iowa Writers' Workshop (the most prestigious post-graduate program in the country) practically until he died.  Many authors write for magazines (and I am not talking about just The Atlantic or The New Yorker).  Of course, less known fiction and non-fiction writers also teach, research, consult, hold executive positions, etc., etc.  

It also explains why so many literary awards come with the words Fellowship or Grant at the end.  It signifies that the author was provided with sufficient funds to sustain her or him through the writing of the next masterpiece. 

Of course, there are bestsellers.  It is said that in order for a book to get on the bestselling list, it must sell at least 7,000 copies a week (in any category).  So, if you see that a book stayed on The New York Times Bestsellers list for, let's say 20 weeks, it means that it has sold at least 140,000 copies.  Now, we are talking about different kind of money - about $500,000 in royalties from a single title.  

Unfortunately, it is quite rare that a true literary novel or a scientifically brilliant non-fiction becomes a bestseller.  With the exception of a few (Kurt Vonnegut again, John Updike, John Irving, Muriel Spark, Alice Munro, Norman Mailer, Jennifer Egan, Johnathan Franzen), most contemporary writers (royalty-free old classics are not the subject of this post), whose work measures up to my standards of quality, never see their names on the bestselling lists.       

It's the thrillers, the soft-porn romances (the Fifty Shades of Grey trilogy still occupies the top three spots), the vampire stories, the heroic fantasies, and the chick-lit opuses that top the charts of fictional hits.  Children and young-adult adventures are distributed by bucketloads through schools and city libraries. 

Most popular non-fiction titles are memoirs, biographies and autobiographies, self-help books that promise to remake and happify you by the time you turn the last page, cook books, chronicles of staggering financial rises and downfalls.

And then there are mega-sellers - books that appeal to armies of readers, generating multi-million dollars revenues for their authors and publishers. Among the most recent fortune-making printed commodities are the Harry Potter series (over 500 million copies world-wide and counting), Twilight series (over 120 million copies), Diary of a Wimpy Kid series (75 million copies), The Hunger Games series (50 million) [all young-adult books]; The Da Vinci Code (80 million) [a pseudo historical thriller with a feminist twist]; The Purpose Driven Life (30 million) [a 40-days spiritual journey manual for finding God]; The Girl with the Dragon Tattoo (30 million) [sexual deviance thriller with even stronger feminist twist].

Note that all fictional books on the mega list were also turned into movies, thus multiplying their author's wealth.  To be fair I must say that it doesn't happen only to low-brow mass-market hits.  High quality literary books are frequently adapted (at much smaller prices, of course) for the silver screen as well (the aforementioned Wonder Boys, Brokeback Mountain, 25th Hour, Fight Club, Forrest Gump, The Color Purple, Stand by Me, Schindler's List, The English Patient, to name a few).  It's another way for a good writer to earn a little bit of extra money. 

We will return to movies later in this series.

Continue to Part II

Quote of the Week: What Makes a Mass-Market Bestseller

"Back at home they drew the curtains and read with disapproval, with relish, with avidity and glee - even the ones who'd never thought of opening a novel before.  There's nothing like a shovelful of dirt to encourage reading."

                                                                                 The Blind Assassin

                                                                                 Winner of the Booker Prize

                                                                                 by Margaret Atwood

 

Lessons from the Author of "CFO Techniques"

Or Ten Things Your Publisher Will Forget to Tell You.

Disclaimer:  The following conclusions are based on a specific experience of one first-time author with one particular publisher.  Marina Guzik does not infer that any other writer of professional books, working on her first or n-th opus for any other, or even the very same, publisher would encounter the same disappointments. 

1.  There will be no color inside your book.  Color printing is expensive and the publisher's intent is to keep the production cost to a bare minimum.  So, all your colorful charts and graphs will be in fifty shades of gray (pun is always intended). The good news is that many people read eBooks now and those are full of color.

2.  As I found out after the signing of the contract, publishers of professional literature utilize a practice of technical reviewing.  Regardless of your credentials, depth of knowledge, experience and professional stature, the publishers will need to hire someone for 2 cent per page to serve as a technical reviewer for your book.  This person's job is to verify that you did not make any errors in definitions, calculations, etc.

3.  Amazingly, this technical reviewer will get his bio printed prominently in the Front Matter right after your own, the author's.  Moreover, the publisher's production department will not have enough common sense to at least make it shorter than the one provided by the humble author, who thought it was unnecessary to list all her accomplishments.

4. Speaking of production.  Somehow their compiler squashes words together, cuts out letters in the illustrations, and does other weird things to the final book layout.  So, after everything is done, you will still need to reread your book in its entirety, fishing out this stupid shit, before giving your final-draft approval.  

5.  As you get closer to the finish line, the publisher will randomly move the book's release date back and forth, due to some internal considerations (like printing arrangements), without letting you know.  So, don't book that wrap party for yourself (did you think for a second that the publishers will do it?) until the book is actually out. 

6.  If the publisher includes a Promotion clause in your contract, which states: "We’ll promote the Work, using Our reasonable judgment about the methods and amount of promotion," you should understand that it means they will not spend a penny on promoting your book - there will be no advertising, no sales tables at the professional conferences, and stuff like that.  There will be nothing, except their "wonderful PR team's" campaign.  

7.  There are Publishers and there are publishers.  If your book is with Wiley, for example, it will be handled by a stronger public relation team.  On the other hand, smaller, less known publishers are staffed with people who didn't make it into the world of the big-time PR influence.  They don't have connections and their rolodexes are skimpy.  They don't have a pull to call on, let's say, a reviewer at Financial Times and recommend your book.  So, their entire "promotional campaign" amounts to posting a public release on PRWeb.com and, allegedly, mass-emailing it to their undisclosed distribution list. 

8.  That single promotional tool, the public release, will be written in a wooden, cumbersome language.  Moreover, it will misrepresent some crucial aspects of your book.   And when you rewrite it yourself to make it snappier and smarter, they will completely ignore your version and post their own anyway.  They will add insult to injury by misspelling your name under your quote.    

9.  If you dare to express your frustration with all this bullshit on the pages of your blog, which is specifically designed as a venting outlet, they will lash out at you and then shut you out: they will not even list your book among their featured titles.

10. Last, but not least, the various eBook versions (Nook, Kindle, ePub, PDF, MOBI) will not be protected by any resellers.  They will be ripped off every legitimate site, including that of your publishers', and offered for free on the Internet.  Thus, your copyrights will be brutally infringed and your meager ability to earn any royalty off of your own work will be drastically diminished.  The publishers will not do anything about it.  They will not even reply to your emails on the subject.  

You have to appreciate, though, what they do tell you in advance:

1.  Even though there are 6 million companies with less than 100 employees in this country and you wrote a book that can help them to survive, you can consider yourself lucky if a few thousand copies will be sold in several years.  How many small-business owners and their downtrodden senior financial managers have you seen improving their organizations by the book?   

2. Hence, there is no fame or fortune in writing professional books; 

3. It's not the book itself, but what you do with it.

Knowing this keeps you real.  If you are not going to promote the book at your own expense, or utilize it to enhance your professional exposure, accept the fact that seeing it published simply massages your ego.  Nothing more.  

Do Yourself a Favor and Buy Your Boss Some Ginkgo

I am currently reading Jennifer Egan's A Visit from the Goon Squad.  Excellent book.  It's categorized by booksellers as a novel, but it is essentially a collection of stories stringed together by each character's connection to the book's most realized protagonist - the music-industry executive, Bennie Salazar.  I love that kind of staff.  Yet, it's not the author's writing skills that make this book important to me, it's the vivid emotional familiarity of people and situations.  Good writers manage to reach their audience in that way: you read a dialogue or an internal monologue and your heart aches with the painful recognition.

Let's leave the introspective explorations for some other discussion, though.  In light of this post's title I want to describe one particular scene in the book that seems to be taken straight out of my own experience with many a boss.

Bennie Salazar, the President of the record label he founded some years ago, is in his car with his right-hand and catch-all Sasha.  They just listened to the new material of one of the company's signed acts.  Sasha rules the two punk sisters unlistenable.  Bennie woefully wonders, what happened in the two years since he'd signed them on.  Sasha reminds him that it has been five, not two years.  She even gives him a precise time reference: she went to the contract signing straight from Windows on the World, i.e. when the Twin Towers were still intact.

Oh my God!  Did that ring a huge bell in my head?  Situations like this occurred with uncanny regularity throughout my entire career, no matter who the boss was.  We could be in the meeting with some bankers, for example, pitching the expansion of credit lines, and I would show a chart explaining how the company has been adding $40 million to its volume annually for the past five years.  Afterwards, the boss would ask me, if those numbers were true.  Are you fucking kidding me?  You've only seen the chart like a million times.  

And then there are endlessly repetitive requests: Could you send me that report for May (just sent it two days ago, but he doesn't recall)?  What was the bottom line in that forecast you compiled (what did you do with your copy of it)?  Let's finalize that new venture prospectus, okay ("we" did day before yesterday - it's on your desk)?  And so on and so forth.       

Sometimes it seems that the stress of running their own businesses causes these people to experience some form of amnesia or the early onset of Alzheimer's.  But that's not it, because their brains appear to be functioning just fine otherwise.  The fact that this memory issue is such a frequent occurrence among the entrepreneurs of various cultural and social backgrounds, operating in different industries, seems to indicate a psychological rather than physiological phenomenon.

It's my opinion that, when it comes to the retention of any type of information, these people have a luxury of allowing their brains to be extremely selective.  It's not like they make a deliberately verbalized decision, "I choose not to remember this."  But somewhere, deep in their subconsciousness, the opportunity to rely on various subordinates as human data-banks renders the memorization of routine data redundant.  It doesn't matter to them that this makes them look somewhat slow.  The value of your time wasted on verbally repeating and emailing the same things over and over again matters even less.

It's possible that the general improvement of memory functions attributed to Ginkgo can lower this mental resistance to absorbing information.  It may force certain tidbits to stick inside automatically.  Hey, if you are desperate enough, why not try it?  Just put it on his desk when nobody is looking and see what happens.  

Ten Reasons Why "CFO Techniques" Is a Must-Read for Small-Business CFOs

Reason #1.

"CFO Techniques" was NOT written from an academic perspective, such as of a typical university professor with a consulting-for-large-business on the side.

On the contrary, it WAS WRITTEN by your fellow CFO, who earned her professional stripes in the small-business trenches. During more than 20 years of this hands-on experience, with the last 18 in CFO and Controller positions, she was fortunate to gain exposure to all facets of financial management and organizational administration. Just like the most of you, she knows only too well what it means to wear many hats at the same time.

Reason #2.

Yet, the author did not loose a constructive touch of a theoretician. In writing the book, she employed her:

• in-depth knowledge of the fundamental principles that govern all areas of corporate accounting and finance,
• methodical approach to all tasks that compile ever-expanding scope of a CFO's responsibilities,
• and ability to dissect the cause and effect relationships of various concepts.

The result is the crystallization of the vast experience into a streamlined functional system, easily adaptable to various types of businesses and industries.

Reason #3.

"CFO Techniques" doesn't try to rehash official regulations, statistical information, bits of hot technology news, results of narrow studies, and such. The book's mission is to spotlight the most important areas of a CFO's or a controller's functionality:

Reason #4.

These professional cornerstones are broken down into crucial components described in bite-size, easily digestible chapters written in a fun and lithe language. The book presents the most complex financial and accounting concepts in comprehensive forms,  which can serve as introductory aids for those who just attained their first controllership appointment and as concise refreshers for seasoned professionals.

Reason #5.

It is an unfortunate truth that millions of small businesses struggle (and frequently fail) to survive not because they are neglected by owners and managers, but because these hard-working people simply have no clue what exactly is wrong with their companies, where are the weakest points, which areas require immediate improvements. Smaller enterprises suffer the most from the lack, even complete absence, of business intelligence and performance analytics. "CFO Techniques" is a part of the author's personal crusade to help small and mid-size businesses by providing them with survival tools (analytical, budgetary, procedural, etc.) that don't require expensive and complicated software.

Reason #6.

One of the most unique and valuable devices offered within the book is the proprietary  chart

INCOTERMS FOR ACCOUNTANTS.

Originally developed by Eclectic & Dynamic Controllership Consulting (E&D CC) specifically for businesses involved in buying and selling goods, it expands the definitions of standard Incoterms to include such accounting notions as title transfer rules and description of applicable source documents, thus accommodating needs of proper revenue, COGS, and inventory recognition.

 

Reason #7.

One of the main underlying themes of the book is the necessity for small-business CFO's and controllers to raise themselves above the bean-counting stereotype and become critical thinkers, indispensable members of the executive management team. "CFO Techniques" emphasizes this pressing demand throughout every section and accentuates the tasks that may facilitate such transformation.

Reason #8.

While shedding new light on the day-to-day routines and spinning conventional accounting and finance tasks as crucial and indispensable cogs in the business machine, the author's functional system gives equal rights to new categories of CFOs responsibilities, such as company-wide Information Technology Management, Risk Control, and Strategic Planning.

Reason #9.

The book takes a holistic approach to multi-faceted positions of CFOs and controllers and supplements specific structural guidelines and practical functional advices with discussions of more general topics applicable to any senior professional operating in private-business environment. Among others, it includes observations and suggestions on how to deal with people on different level of corporate hierarchy and what changes to expect in your future, even if at the moment you feel 100% secure.  

Reason #10.

Even if you don't learn anything new, or if you'll find the book not applicable to your specific professional niche, at the very least you can entertain yourself with the multitude of eclectic cultural references and business insights from the author's personal experience woven through the book's text.

Ten Reasons Why "CFO Techniques" Is a Must-Read for Entrepreneurs

Reason #1.

You are a part of a proud cohort of just a few millions of people who summoned their courage and said, "I will not work for the Man anymore! I will be my own boss!"

While your company is growing, it will need to keep its overhead lean. Meanwhile, you can use "CFO Techniques" as a surrogate for a seasoned executive that will provide you with clear guidelines for financial and administrative management.

Reason #2.

Don't let the title fool you. "CFO Techniques" is not a bean-counting manual. It's written with a view to achieving commercial success and places business considerations ahead of everything else.

Reason #3.

It will arm you with a flexible framework for structuring your business in a logical and sensible way.

Reason #4.

"CFO Techniques" is not an academic textbook either. It manages to shed new light on various aspects of finance and business in a fun and easy language. The book is organized into a bite-sized chapters sprinkled with familiar cultural references and illustrations from the author's professional life.

Reason #5.

Yet, it's packed with practical advice,

instructive suggestions, step-by-step guidelines,

checklists,

and visual examples.

Reason #6.

"CFO Techniques" will provide you with a comprehensive breakdown on acquisition of capital resources necessary to sustain and grow your business.

Reason #7.

An entire section of the book is devoted to assessment, reduction, and transfer of the internal and external risks your company may encounter in a normal course of business and in extraordinary circumstances.

Reason #8.

"CFO Techniques" will show you that one of the most critical determinants of whether your company will fail or prosper is the active attention to its performance. The book rejects the rigidity of the uniform approach to business intelligence and underscores the importance of selecting specific indicators that will have the most significant impact on your decision-making process.

Reason #9.

Anticipating your furture needs, the book describes the fundamental steps of strategic planning and basic techniques for explorting opportunities as well as diminishing external threats.

Reason #10.

And when you are looking to hire a CFO, a valuable member of your executive team, the book may serve you as a benchmark in evaluating the candidates' breadth of expertise and depth of knowledge.

"CFO Techniques" Technical Reviewer's Comment for Small Business CFOs

LinkedIn Groups

• Group: Small Business CFOs
• Discussion: How important is to have a Policy & Procedure for a small business?

"Marina Guzik references her recently published "CFO Techniques" book, and it truly is a terrific reference guide for savvy CFO's, containing valuable information about best practice considerations on a number of critical topics. She has done an outstanding job of writing an easy-to-read one-stop source of valuable tips on identifying and solidifying core business functions, and it was my pleasure to assist with its technical review. A must-read for those wishing to learn more about making their business the strongest it can financially be!"
Posted by Randy KRUG