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Well, what do you expect?

Posted by iBlog on July 6, 2008

FOR the first time since the credit crisis began, the Federal Reserve’s open-market committee decided to keep American interest rates on hold. In a statement released after its policy meeting on Wednesday June 25th the Fed said the dangers to GDP growth had “diminished somewhat” but conceded that the continued rise in energy prices meant the risks of inflation had increased.

This was a shift in judgment, if a subtle one, about where the biggest threat to America’s economy lies. But there was no hint that higher interest rates are imminent. Richard Fisher, the president of the Dallas Fed, was the only member of the ten-strong rate-setting committee to vote for a rise.

After a series of cuts since the summer, the fed-funds rate, at 2%, looks uncomfortably low when set against headline inflation at 4.2%. Yet the Fed seems confident that inflation will moderate. One reason is that higher inflation reflects a jump in the cost of oil and food rather than a broad acceleration in prices. When commodity prices shoot higher, the standard policy response is to treat the resulting rise in inflation as a once-and-for-all shift in relative prices. An interest-rate increase big enough to squeeze inflation back down in short order would cause a needlessly large rise in unemployment.

As long as the public believes the Fed will act to control inflation, today’s price increases are unlikely to feed tomorrow’s wage claims, and a wage-price spiral can be averted. The trouble is, expectations of inflation have started to pick up. A survey by the University of Michigan shows that inflation is expected to be over 5% in the next year, the highest reading since 1982. And expected inflation for the next five to ten years is 3.4%, the highest since 1995. This trend is mirrored in other rich countries. In Britain expectations have risen to their highest level since the central bank’s survey began in 1999. A poll of the euro area, carried out by the European Commission, also shows a rise in the balance of consumers expecting higher inflation.

Until recently, central bankers have looked on the stability of inflation expectations with satisfaction. The public seemed to trust that independent monetary stewards would not be tempted, as politicians might be, to keep interest rates too low to control inflation. But now that faith is in doubt, policymakers seem to be shifting tack. The Fed’s statement referred to a pick up in “some” indictors of expectations but reckoned that this was a sign only of greater “uncertainty” about the outlook. In a speech on June 9th Ben Bernanke, the Fed chairman, admitted to gaps in knowledge about how the actions of central banks affect inflation expectations and how these in turn have a bearing on inflation. Such qualifications are a hint that inflation expectations may have lost their place at the heart of policymaking.

One reason not to worry is that perceptions often differ from reality. Consumers may be overly sensitive to changes in the price of frequent purchases, such as food and fuel, while they overlook the stability of other prices. As the effect of the commodity shock fades, expectations are likely to follow recorded inflation back down again.

If, however, an inflation psychology is returning, not all the rich world’s central bankers appear to be treating it with the same degree of trepidation. The European Central Bank has signalled that it will raise interest rates at its next meeting on July 3rd, to show that inflation remains its main concern. That the central bankers at its American counterpart are sitting on their hands, for the moment, reflects the greater threat of a sharp downturn in the economy there. But if the Fed’s rate-setters are too complacent about rising inflation expectations, they run the risk of squandering the credibility their predecessors earned at such a high price.

Posted in Current News, Finance | 1 Comment »

Raising Capital In An Economic Slowdown

Posted by iBlog on May 13, 2008

Raising capital is difficult under normal conditions, and a tight credit market and fears of an economic slowdown have made the challenge harder. Unproven early-stage companies could face a tough time finding funds from informal investors who are less willing to take risks in an unsteady economy. Firms looking for equity investments should expect to give up more ownership for less cash than during flusher times. For established businesses that are good credit risks, lower interest rates will make borrowing more attractive. Here’s what you need to know.

Where should I look for capital if I have an existing business?

A good source might be a loan or credit line from your local independent bank (BusinessWeek.com, 12/26/06), especially if you already have a business relationship there. Subprime mortgage defaults have hit banking giants (BusinessWeek.com, 1/15/08) like Citigroup (C) hard, but most smaller banks don’t face the same losses. “Community banks have very solid balance sheets and liquidity. They’re not having to do the large writedowns for the subprime mess because they’re traditionally more prudent lenders,” says Paul Merski, chief economist at the Independent Community Bankers of America, a trade group. “They have money to lend.”

Is now good time to take out a loan?

Yes, if you can get it. The Federal Reserve has dropped its rate target for overnight lending by 2.25 percentage points since the summer, to 3%, in an effort to ease the credit crunch. That means banks can offer borrowers lower rates and make the same profit. “If you have a good business and you have a good relationship with your lender and interest rates are coming down, it may be even less expensive to borrow,” says Merski.

Will I face tighter credit standards?

Banks are still looking to lend to companies that have the ability to repay, according to Rebecca Macieira-Kaufmann, executive vice-president and head of Wells Fargo’s (WFC) small business segment. “In any economic environment, we’re going to want to look at a profitable business, an established business that has a history,” she says. The same credit standards apply for business loans, but an economic downturn could make it harder for you to meet them. “What will happen in a stressed economic environment is you may have fewer receivables, your collateral may be worth less,” Macieira-Kaufmann says.

Lenders are looking closely at the region and the sector that loan applicants are in, she says. You should demonstrate that your business is resilient enough to weather an industry slump. For example, businesses that thrived off new-home construction should show that they can shift to existing homes.

What if I my credit isn’t good enough?

There are nonbank options available for businesses that can’t land traditional loans. One new company in this space, On Deck Capital, offers loans of up to $100,000 to small firms based on their cash flow, rather than the owner’s personal credit rating. “We focus on loans to small businesses who can’t qualify for bank loans,” says Mitch Jacobs, On Deck’s CEO. “We’ve entered the market to fill the gap.” Jacobs says interest rates are “in the ballpark” of traditional bank loans. Borrowers have to be in business for at least a year and show they have adequate cash flow of at least $3,000 a month in credit-card volume

Posted in Entrepreneurship, Finance | 2 Comments »

Raising Funding for Entrepreneurs

Posted by iBlog on May 13, 2008

Most entrepreneurs, at some point along the way, need a good chunk of other people’s money. Although many small business owners have great ideas and a generous dollop of charm, they often shortchange the relationships that can bring in capital when they need it. “Entrepreneurs can get so swallowed up in their enterprise that they don’t take the time to romance those who they need to invest in them,” says Jerold Panas, executive partner and CEO of Jerold Panas, Linzy & Partners, a Chicago fundraising company that works with nonprofits, and author of Asking: A 59-Minute Guide to Everything Board Members, Volunteers, and Staff Must Know to Secure the Gift.

Chemistry isn’t enough. “A relationship will not guarantee you financing,” says Edward Zimmerman, partner at Lowenstein Sandler in New York and founder of AngelVineVC, a network of angel investors and venture funds. “You still have to perform. But there is always some relationship in place before a deal closes.”

Many business owners just aren’t comfortable asking for money. But professional fundraisers spend all their time doing it, and entrepreneurs would be wise to adopt some tricks of their trade. Most likely, your anxiety about asking for money will fade as you slowly build relationships with people who become so interested in your company they volunteer to open their checkbooks.

FIND PROSPECTS
1.
Cultivating investors is a long-term affair. “Respect must be earned,” says David Lansdowne, a fundraising consultant and author of Fund Raising Realities Every Board Member Must Face. “Passion must be stoked.” Successful suitors meet potential investors long before they need money. “We’re always much more eager to talk to entrepreneurs when they aren’t raising capital,” says Joel Cutler, managing director at General Catalyst Partners, a $1 billion venture fund in Cambridge, Mass. “It gives us time to develop the relationship without the pressure of closing the deal. We don’t want a dating game, we want relationship development.”

You may have greater entrée to potential backers than you think. Your banker and accountant are obvious go-betweens, but perhaps your neighbor works for a law firm specializing in deals, or a former college roommate is in venture capital, or your second cousin runs a company and has fought the financing wars herself. But don’t ask your pals to do more than set up an introduction. “I do not want to talk to a banker or accountant or lawyer,” says Cutler. “I want to talk to the CEO. This is the person I will be developing the relationship with, the one who is the protagonist of the idea.”

Follow up an introduction immediately with a pithy e-mail explaining what your company does and why the investor might want to know about it. But don’t burden people with PDFs or spreadsheets, or slip into sales mode. As Cutler says: “An e-mail that tells me I’m going to make a billion dollars is not as valuable as one saying, ‘I am an entrepreneur and I’m not looking for capital today, but I think you will be interested in learning about my company. Do you have some time when we can chat?'”

Former colleagues and employers can also help. Sheila Lirio Marcelo, founder and CEO of Care.com, a 25-employee startup in Waltham, Mass., that offers a searchable database of caregivers, long hoped to launch her own company one day. She made a point of meeting the venture capitalists on the boards of the companies where she worked. So Marcelo already had a strong relationship with executives at Matrix Partners, a venture fund in Waltham, when she had the idea for Care.com. She launched in May, 2007, with $3.5 million in Matrix funding. Says Marcelo: “You have to take a long-term view of every job and relationship you have.”

Look for donors most likely to fall in love with your idea, says Panas. Don’t be afraid to cast a wide net. Investors are always looking for good companies to support and are happy to learn about them. Travis Corcoran is taking advantage of that eagerness. Almost immediately after launching Smart- Flix in January, 2005, Corcoran started a bimonthly e-mail newsletter about his $1 million, 10-employee company, which rents how-to videos and DVDs à la Netflix from its offices in Arlington, Mass. He asked executives and entrepreneurs he knew from previous jobs if they’d like to receive his bulletin. Five said yes. The roll has since grown to about two dozen, including several venture capitalists.

FIRST DATES
2.
As in any courtship, it helps to know the tastes, interests, and background of the person you are wooing. You can often find an enormous amount of information about people online, including philanthropic interests, alma maters, and even net worth. Search on Google, as well as on business networking sites such as LinkedIn. Try to find out if your prospect prefers talking about business over lunch or espresso or martinis. Always defer on questions of time and location, even if you have to put off meeting for weeks or months. Remember, your goal is a long-term relationship.

Fundraisers advise that establishing your credibility at the outset is crucial. If you haven’t already, set clear revenue goals that you can share with potential backers. Make sure you understand your balance sheet and any weaknesses in your company that others might question. There’s no magic number for how much revenue you should have before you approach investors, says Zimmerman, but you do need to show why and how you expect to grow, and you must be able to explain your competition.

It is never, ever wise to ask potential investors for money during your first meeting. “It’s not unusual to visit a potential donor two or three times before even bringing up the discussion of a [donation],” says Lansdowne. “These early visits are critical to setting the stage for your relationship. Take the time to learn about your investor’s personal and business preferences.” Show passion for your product and ideas, but don’t boast about your successes. Instead, ask your new contacts for advice. Then they’ll be personally engaged in the growth of your company.

At this stage, you shouldn’t be monogamous. Meet as many potential investors as you can. As you get to know them, the field will narrow. “We can tell pretty quickly if an entrepreneur has a good idea or not,” says Michael Rolnick, general partner at ComVentures, a $1.5 billion Palo Alto (Calif.)-based venture capital firm. “What we can’t tell right away is if a person is insightful, manages well, hires well, sells well. So it’s always helpful for us to reduce the risk by getting to know somebody or have somebody we know vouch for them.”

BUILD THE RELATIONSHIP
3.
After a first meeting, send a thank-you e-mail or note. Keep your prospect interested, either through regular updates or the occasional note after you land a big client, say, or launch a product. Some fundraising pros, like Panas, say such “touches” should come monthly. Others recommend that you share only particularly significant news. Still others don’t want to hear from you until you fix the problems they’ve brought to your attention. “If I have questions about a company,” says Rolnick, “the right time to follow up with me is when those questions are resolved.” Use this getting-to-know-you period to show you’ve absorbed the advice your potential investors have generously given you. “Talk shop,” advises Zimmerman. “You can get legitimate business advice during this process, and it’s a great way for investors to follow your growth.”

Unless you’re actively seeking investment, you should be spending only 10 to 15 hours a week on networking. “You want to make sure that your networking doesn’t get in the way of building your sales,” says David Honig, vice-president of Insight Venture Partners, a $1.2 billion venture fund in New York City. “Less is more during the courtship process.”

When your business does take a great leap forward, the time will be right to suggest another meeting—the one where you ask for the money.

THE COMMITMENT
4.
When you’re ready to broach the topic of money, you may find to your relief that you only have to drop a hint. Corcoran of SmartFlix hasn’t yet asked anyone to invest, but he has had volunteers. In his newsletter this summer, he mentioned that his growth forecast was rosy, but that he wasn’t sure where he would turn for financing. Within two days he had three offers.

Even if no one is throwing money at you, you’re likely to know by now who your best prospects are and how much they might be willing to invest. You also should have figured out how much you really need and what you’re willing to give up for it—perhaps a seat on your board or some other advisory role. Ask for one more meeting with your prospects, and talk to them honestly about your goals. If they don’t see eye-to-eye with you on your strategy, talk candidly about why. In the end, if they say yes, bring in your banker or your attorney to handle the formalities.

If your potential investor says no, don’t be discouraged or think your effort was wasted. Rolnick has turned down entrepreneurs several times but kept in touch because, he says, “If I think they are quality people with quality ideas, I will always want to maintain that relationship.” More than once he has jumped at a chance to back a serial entrepreneur after declining to invest in an earlier venture.

Posted in Entrepreneurship, Finance | 1 Comment »

Capital Management

Posted by iBlog on January 6, 2008

Most business executives around the world agree that global social, environmental, and business trends are generally more important to corporate strategy than they were five years ago. But relatively few companies act on these trends, and many of those that do appear to be acting tentatively and have yet to see significant positive results, according to the latest McKinsey Quarterly survey.1

Take, for instance, the growing number of consumers in emerging economies. Almost eight respondents out of ten consider this trend important for global business, and six in ten think it will have a positive impact on their companies’ profits. Yet little more than one-third say that their companies have taken active steps to address it.

The survey also revealed that only 17 percent of the executives report that actions their companies have taken on such trends have produced a significantly positive result. One reason might be that companies are not making all of the (or the right) strategic moves to realize the full opportunities of the trends. Almost seven executives out of ten, for example, say that their companies addressed the consumer trend by building operations or expanding existing ones in emerging economies. But just slightly more than four in ten report that their companies developed new, lower-cost products or services for customers in these economies—which is often a prerequisite for serving the huge and fast-growing middle-income segment in, for instance, China and India.

Why don’t companies act on trends that their executives say are important? Respondents often cite higher strategic priorities and a lack of skills and resources or say that their companies simply haven’t yet decided whether or not to act.

Posted in Capital Management, Finance | Leave a Comment »

Starting Up As CFO

Posted by iBlog on January 6, 2008

March 2008


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In recent years, CFOs have assumed increasingly complex, strategic roles focused on driving the creation of value across the entire business. Growing shareholder expectations and activism, more intense M&A, mounting regulatory scrutiny over corporate conduct and compliance, and evolving expectations for the finance function have put CFOs in the middle of many corporate decisions—and made them more directly accountable for the performance of companies.

Not only is the job more complicated, but a lot of CFOs are new at it—turnover in 2006 for Fortune 500 companies was estimated at 13 percent.1 Compounding the pressures, companies are also more likely to reach outside the organization to recruit new CFOs, who may therefore have to learn a new industry as well as a new role.

To show how it is changing—and how to work through the evolving expectations—we surveyed 164 CFOs of many different tenures2 and interviewed 20 of them. From these sources, as well as our years of experience working with experienced CFOs, we have distilled lessons that shed light on what it takes to succeed. We emphasize the initial transition period: the first three to six months.

Early priorities

Newly appointed CFOs are invariably interested, often anxiously, in making their mark. Where they should focus varies from company to company. In some, enterprise-wide strategic and transformational initiatives (such as value-based management, corporate-center strategy, or portfolio optimization) require considerable CFO involvement. In others, day-to-day business needs can be more demanding and time sensitive—especially in the Sarbanes–Oxley environment—creating significant distractions unless they are carefully managed. When CFOs inherit an organization under stress, they may have no choice but to lead a turnaround, which requires large amounts of time to cut costs and reassure investors.

Yet some activities should make almost every CFO’s short list of priorities. Getting them defined in a company-specific way is a critical step in balancing efforts to achieve technical excellence in the finance function with strategic initiatives to create value.

Conduct a value creation audit

The most critical activity during a CFO’s first hundred days, according to more than 55 percent of our survey respondents, is understanding what drives their company’s business. These drivers include the way a company makes money, its margin advantage, its returns on invested capital (ROIC), and the reasons for them. At the same time, the CFO must also consider potential ways to improve these drivers, such as sources of growth, operational improvements, and changes in the business model, as well as and how much the company might gain from all of them. To develop that understanding, several CFOs we interviewed conducted a strategy and value audit soon after assuming the position. They evaluated their companies from an investor’s perspective to understand how the capital markets would value the relative impact of revenue versus higher margins or capital efficiency and assessed whether efforts to adjust prices, cut costs, and the like would create value, and if so how much.

Although this kind of effort would clearly be a priority for external hires, it can also be useful for internal ones. As a CFO promoted internally at one high-tech company explained, “When I was the CFO of a business unit, I never worried about corporate taxation. I never thought about portfolio-level risk exposure in terms of products and geographies. When I became corporate CFO, I had to learn about business drivers that are less important to individual business unit performance.”

The choice of information sources for getting up to speed on business drivers can vary. As CFOs conducted their value audit, they typically started by mastering existing information, usually by meeting with business unit heads, who not only shared the specifics of product lines or markets but are also important because they use the finance function’s services. Indeed, a majority of CFOs in our survey, and particularly those in private companies, wished that they had spent even more time with this group (Exhibit 1). Such meetings allow CFOs to start building relationships with these key stakeholders of the finance function and to understand their needs. Other CFOs look for external perspectives on their companies and on the marketplace by talking to customers, investors, or professional service providers. The CFO at one pharma company reported spending his first month on the job “riding around with a sales rep and meeting up with our key customers. It’s amazing how much I actually learned from these discussions. This was information that no one inside the company could have told me.”

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Lead the leaders

Experienced CFOs not only understand and try to drive the CEO’s agenda, but also know they must help to shape it. CFOs often begin aligning themselves with the CEO and board members well before taking office. During the recruiting process, most CFOs we interviewed received very explicit guidance from them about the issues they considered important, as well as where the CFO would have to assume a leadership role. Similarly, nearly four-fifths of the CFOs in our survey reported that the CEO explained what was expected from them—particularly that they serve as active members of the senior-management team, contribute to the company’s performance, and make the finance organization efficient (Exhibit 2). When one new CFO asked the CEO what he expected at the one-year mark, the response was, “When you’re able to finish my sentences, you’ll know you’re on the right track.”

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Building that kind of alignment is a challenge for CFOs, who must have a certain ultimate independence as the voice of the shareholder. That means they must immediately begin to shape the CEO’s agenda around their own focus on value creation. Among the CFOs we interviewed, those who had conducted a value audit could immediately pitch their insights to the CEO and the board—thus gaining credibility and starting to shape the dialogue. In some cases, facts that surfaced during the process enabled CFOs to challenge business unit orthodoxies. What’s more, the CFO is in a unique position to put numbers against a company’s strategic options in a way that lends a sharp edge to decision making. The CFO at a high-tech company, for example, created a plan that identified several key issues for the long-term health of the business, including how large enterprises could use its product more efficiently. This CFO then prodded sales and service to develop a new strategy and team to drive the product’s adoption.

To play these roles, a CFO must establish trust with the board and the CEO, avoiding any appearance of conflict with them while challenging their decisions and the company’s direction if necessary. Maintaining the right balance is an art, not a science. As the CFO at a leading software company told us, “It’s important to be always aligned with the CEO and also to be able to factually call the balls and strikes as you see them. When you cannot balance the two, you need to find a new role.”

Strengthen the core

To gain the time for agenda-shaping priorities, CFOs must have a well-functioning finance function behind them; otherwise, they won’t have the credibility and hard data to make the difficult arguments. Many new CFOs find that disparate IT systems, highly manual processes, an unskilled finance staff, or unwieldy organizational structures hamper their ability to do anything beyond closing the quarter on time. In order to strengthen the core team, during the first hundred days about three-quarters of the new CFOs we surveyed initiated (or developed a plan to initiate) fundamental changes in the function’s core activities (Exhibit 3).

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Several of our CFOs launched a rigorous look at the finance organization and operations they had just taken over, and many experienced CFOs said they wished they had done so. In these reviews, the CFOs assessed the reporting structure, evaluated the fit and capabilities of the finance executives they had inherited, validated the finance organization’s cost benchmarks, and identified any gaps in the effectiveness or efficiency of key systems, processes, and reports. The results of such a review can help CFOs gauge how much energy they will need to invest in the finance organization during their initial 6 to 12 months in office—and to fix any problems they find.

Transitions offer a rare opportunity: the organization is usually open to change. More than half of our respondents made at least moderate alterations in the core finance team early in their tenure. As one CFO of a global software company put it, “If there is a burning platform, then you need to find it and tackle it. If you know you will need to make people changes, make them as fast as you can. Waiting only gets you into more trouble.”

Manage performance actively

CFOs can play a critical role in enhancing the performance dialogue of the corporate center, the business units, and corporate functions. They have a number of tools at their disposal, including dashboards, performance targets, enhanced planning processes, the corporate review calendar, and even their own relationships with the leaders of business units and functions.

Among the CFOs we interviewed, some use these tools, as well as facts and insights derived from the CFO’s unique access to information about the business, to challenge other executives. A number of interviewees take a different approach, however, exploiting what they call the “rhythm of the business” by using the corporate-planning calendar to shape the performance dialogue through discussions, their own agendas, and metrics. Still other CFOs, we have observed, exert influence through their personal credibility at performance reviews.

While no consensus emerged from our discussions, the more experienced CFOs stressed the importance of learning about a company’s current performance dialogues early on, understanding where its performance must be improved, and developing a long-term strategy to influence efforts to do so. Such a strategy might use the CFO’s ability to engage with other senior executives, as well as changed systems and processes that could spur performance and create accountability.

First steps

Given the magnitude of what CFOs may be required to do, it is no surprise that the first 100 to 200 days can be taxing. Yet those who have passed through this transition suggest several useful tactics. Some would be applicable to any major corporate leadership role but are nevertheless highly relevant for new CFOs—in particular, those who come from functional roles.

Get a mentor

Although a majority of the CFOs we interviewed said that their early days on the job were satisfactory, the transition wasn’t without specific challenges. A common complaint we hear is about the lack of mentors—an issue that also came up in our recent survey results, which showed that 32 percent of the responding CFOs didn’t have one. Forty-six percent of the respondents said that the CEO had mentored them, but the relationship appeared to be quite different from the traditional mentorship model, because many CFOs felt uncomfortable telling the boss everything about the challenges they faced. As one CFO put it during an interview, “being a CFO is probably one of the loneliest jobs out there.” Many of the CFOs we spoke with mentioned the value of having one or two mentors outside the company to serve as a sounding board. We also know CFOs who have joined high-value roundtables and other such forums to build networks and share ideas.

Listen first . . . then act

Given the declining average tenure in office of corporate leaders, and the high turnover among CFOs in particular, finance executives often feel pressure to make their mark sooner rather than later. This pressure creates a potentially unhealthy bias toward acting with incomplete—or, worse, inaccurate—information. While we believe strongly that CFOs should be aggressive and action oriented, they must use their energy and enthusiasm effectively. As one CFO reflected in hindsight, “I would have spent even more time listening and less time doing. People do anticipate change from a new CFO, but they also respect you more if you take the time to listen and learn and get it right when you act.”

Make a few themes your priority—consistently

Supplement your day-to-day activities with no more than three to four major change initiatives and focus on them consistently. To make change happen, you will have to repeat your message over and over—internally, to the finance staff, and externally, to other stakeholders. Communicate your changes by stressing broad themes that, over time, could encompass newly identified issues and actions. One element of your agenda, for example, might be the broad theme of improving the efficiency of financial operations rather than just the narrow one of offshoring.

Invest time up front to gain credibility

Gaining credibility early on is a common challenge—particularly, according to our survey, for a CFO hired from outside a company. In some cases, it’s sufficient to invest enough time to know the numbers cold, as well as the company’s products, markets, and plans. In other cases, gaining credibility may force you to adjust your mind-set fundamentally.

The CFOs we interviewed told us that it’s hard to win support and respect from other corporate officers without making a conscious effort to think like a CFO. Clearly, one with the mentality of a lead controller, focused on compliance and control, isn’t likely to make the kind of risky but thoughtful decisions needed to help a company grow. Challenging a business plan and a strategy isn’t always about reducing investments and squeezing incremental margins. The CFO has an opportunity to apply a finance lens to management’s approach and to ensure that a company thoroughly examines all possible ways of accelerating and maximizing the capture of value.

As an increasing number of executives become new CFOs, their ability to gain an understanding of where value is created and to develop a strategy for influencing both executives and ongoing performance management will shape their future legacies. While day-to-day operations can quickly absorb the time of any new CFO, continued focus on these issues and the underlying quality of the finance operation defines world class CFOs.

About the Authors

Bertil Chappuis and Paul Roche are directors in McKinsey’s Silicon Valley office; Aimee Kim is an associate principal in the New Jersey office.

Notes

1Financial Officers’ Turnover, 2007 Study, Russell Reynolds Associates.

2We surveyed 164 current or former CFOs across industries, geographies, revenue categories, and ownership structures. For more of our conclusions, see “The CFO’s first hundred days: A McKinsey Global Survey,” mckinseyquarterly.com, December 2007.

Posted in Corporate Finance, Current News, Finance, Mckinsey | Leave a Comment »

Dollar Sinks To A New Low

Posted by iBlog on September 12, 2007

The 13-nation euro rose as high as $1.3901 in late afternoon European trading — topping its previous record of $1.3852, reached on July 24. It almost immediately fell back to $1.3889, compared with the $1.3832 it bought in New York late Tuesday.The sudden surge came after Treasury Secretary Henry Paulson, speaking to officials from some of the biggest financial firms in the U.S., said that volatility in financial markets will take some time to be resolved, particularly in the area of subprime mortgages

http://biz.yahoo.com/ap/070912/dollar.html?.v=4

Posted in Current News, Finance | Leave a Comment »

No Stopping Chinese Stocks

Posted by iBlog on September 12, 2007

Seems like nothing can cool Chinese investors’ ardor for local stocks. Despite market meltdowns in the rest of the world and moves by Beijing to dampen demand for equities, China’s stock markets are at a record high. On Aug. 22, China’s benchmark CSI 300 stock index blasted through the all-important 5000 level, shrugging off an interest-rate hike by the central government announced the previous day, to close up 78.98 points, to 5051.69. The index, which tracks the 300 most important companies listed in Shanghai and Shenzhen, has jumped 147% this year

Read the full article in BusinessWeek.com

Posted in Asia Business, China Global, Finance, Wall Street | Leave a Comment »

The Next Private Equity Bid

Posted by iBlog on September 9, 2007

In June, Shaw disclosed it owned 6.2% of the company and said it was pushing for changes at ITG to boost its stock price. On Sept. 4, the Federal Trade Commission approved Shaw’s request to further increase its stake to 15%. The FTC action, under the Hart-Scott-Rodino Act, waives a waiting period and clears away antitrust concerns.

It’s a step commonly taken by activist investors. “It provides them the freedom to increase their ownership of the company,” says Damien Park, president of Hedge Fund Solutions. Last month, shares of Biogen (BIIB) hit a one-year high after activist investor Carl Icahn won FTC clearance to increase his stake in the company.

Read the full article in BusinessWeek.com

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Wall Street Awaits Feds Announcement

Posted by iBlog on September 9, 2007

Investors have been hoping for weeks for a rate cut from the Federal Reserve, which meets Sept. 18. But now, after last week’s disagreeable jobs report, Wall Street is more nervous than ever over the possibility that even the expected quarter-point rate cut next week may not be enough to save the economy from slipping into recession and stocks from sliding into negative territory for the year.

Read the full article in Yahoo.com

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How Bear Stearns Lost Its Way

Posted by iBlog on August 23, 2007

By all rights, this should be a Bear Stearns moment. Investors are skittish, and Wall Street players are unsure what to do next — precisely the conditions under which the scrappy independent has traditionally thrived.Its bare-knuckle approach to the mundane business of trading, especially complicated debt securities, made it the classic countercyclical play — successful in up markets, stellar in downturns. Bear is a link to Wall Street’s past, when brokerages survived more on their moxie than on their spreadsheets.

Read the full article in CnnMoney.com

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Linux Boom Ahead?

Posted by iBlog on August 23, 2007

The SCO Group frightened potential business users away from Linux with lawsuits demanding billions in royalties. But the litigious company’s claims were shot down in a ruling that will likely boost uptake of the operating system.

U.S. District Judge Dale Kimball ruled late Friday that Novell (nasdaq: NOVLnews people ) owns copyrights covering Unix, a computer operating system. In 1995, Novell licensed Unix source code to Santa Cruz Operation, which later became SCO. SCO argued it had also picked up Unix copyrights from the transaction. (See: “Big ‘No’ To SCO”)

The ruling is a huge setback to SCO’s claim it should be paid billions in royalties by International Business Machines. SCO says that International Business Machines (nyse: IBMnews people ) took code from Unix for use in Linux, another operating system. Shares of SCO Group (nasdaq: SCOXnews people ) plummeted 72.8%, or $1.13, to 43 cents. Practically all of SCO’s business is Unix-related.

Read the full article in Forbes.com

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Russia, China or Beyond

Posted by iBlog on August 23, 2007

For the past five years, Russia and China, as superpowers, seemed on the verge of winning the power and respect that had eluded them over the past century. But lately, they have discovered that they are far from immune from the troubles that have swept around the globe in the wake of America’s credit crisis.

With 10% annual economic growth rates compounding each year, and their markets doubling annually, it seemed there was no stopping them. But suddenly, the real integration of the global economy became painfully apparent. There were new questions about the continued ability of the U.S.–the world’s largest and most developed economy–to continue absorbing Chinese exports, and about America’s continued ability to continue to sop up excess quantities of crude that Russia might pour into international oil pipelines. As result, these two markets began to look somewhat less lustrous.

Read the full article in BusinessWeek.com

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Big Banks, Big Bucks

Posted by iBlog on August 23, 2007

In a joint statement, JPMorgan, Wachovia and Bank of America characterized the move as intended to “display the effectiveness” of the Fed’s discount window–in other words to prove there’s no stigma to borrowing from it as opposed to raising cash elsewhere, or in each of their cases, just pulling it out of a drawer.

Read the full article in BusinessWeek.com

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Bank of America Bails Out Countrywide

Posted by iBlog on August 23, 2007

Bank of America knows when it’s time to buy.

The Charlotte, N.C.-based bank is making a $2 billion equity investment in the beleaguered Countrywide Financial (nyse: CFCnews people ), the companies said Wednesday evening.

Bank of America (nyse: BACnews people ) will purchase $2 billion worth of preferred Countrywide stock yielding 7.3%, and that can be converted into common stock at $18 per share, giving the mortgage lender a much-needed cash infusion amid a crippling credit crunch.

Read the full article in BusinessWeek.com

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A Season For Cassandras

Posted by iBlog on August 23, 2007

For 16 years, Stephen Roach served as chief economist at Morgan Stanley (MS) and proved to be one of the gloomiest voices on Wall Street. Take for example his July, 2005, critique of incoming Federal Reserve chairman, Ben Bernanke. Roach wrote of “the mounting pitfalls of yet another post-bubble shakeout—this one dominated by the downside of overvalued property markets and the concomitant unwinding of a potentially lethal debt cycle.”

Read the full article in BusinessWeek.com

Posted in Current News, Economy Today, Finance | Leave a Comment »

No Stopping Chinese Stocks

Posted by iBlog on August 23, 2007

Seems like nothing can cool Chinese investors’ ardor for local stocks. Despite market meltdowns in the rest of the world and moves by Beijing to dampen demand for equities, China’s stock markets are at a record high. On Aug. 22, China’s benchmark CSI 300 stock index blasted through the all-important 5000 level, shrugging off an interest-rate hike by the central government announced the previous day, to close up 78.98 points, to 5051.69. The index, which tracks the 300 most important companies listed in Shanghai and Shenzhen, has jumped 147% this year.

Read the full article in BusinessWeek.com

Posted in Asia Business, China Global, Current News, Finance, Going Global, Investing, World News | Leave a Comment »

Ameritech, eTrade Discuss Merge

Posted by iBlog on August 22, 2007

Online brokerage giants TD Ameritrade Holding Corp. and E-Trade Financial Corp. have been holding talks for weeks about a possible merger, The Wall Street Journal reported Wednesday.The discussions currently are focused on making sure both companies agree on strategy, and the companies aren’t yet close to a deal, the Journal reported, citing unnamed people familiar with the matter.

Read the full article in Yahoo Finance

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So You Need A Financial Planner

Posted by iBlog on August 22, 2007

After years of just scraping by, you finally have some cash to invest. You certainly have plenty of choices. A few hours online will net thousands of stock tips, fund pitches, get-rich-quick schemes, investing gimmicks, and philosophies. Offline, everyone has their own advice, including friends and family who’d love some seed money for their (probably bad) business ideas.

Read the full article in BusinessWeek.com

Posted in Finance, Information Advice, Investing | Leave a Comment »

Burnt Fingers, Red Faces & Bernanke

Posted by iBlog on August 21, 2007

Wall Street shot itself in the foot, and Ben Bernanke came on, sirens wailing.

There are dozens of money managers in both the fixed-income and equities sectors who’ve self-destructed. Not conventional money managers, who grew up as practicing security analysts, analyzing companies and industries, performing sharp-penciled credit analysis of corporate debt instruments.

Read the full article in Forbes.com

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Make The Most Of Every Marketing Dollar

Posted by iBlog on August 20, 2007

The most crucial time in the marketing of a new product or service is the initial rollout. Because “first impressions last,” it is essential for an entrepreneurial venture to successfully launch its product. In fact, in the world of Internet mania, the difference between an initial rollout being a success or a dud can mean literally billions of dollars in market capitalization. Much can be learned even before the launch of a new idea, using the “beta test” process to gather feedback and jump-start the customer acquisition process. This means choosing the most appropriate reference accounts, gaining those reference accounts, getting the press on board and ironing out the bugs in the several months, weeks or, in Internet time, days before a formal product launch. Most importantly, it means getting great referrals from delighted, influential reference accounts.

Read the full article in Forbes.com

Posted in Advertising, Finance, Sales & Marketing | 2 Comments »

Same Old Imus?

Posted by iBlog on August 20, 2007

Four months after his much-publicized canning, veteran talk show host Don Imus is back in the spotlight, this time for his expected return. But should audiences expect a softer Imus? Or will the cantankerous host return to his regular fare?

Read the full article in Forbes.com

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Investment Advice From Buffet & Monger

Posted by iBlog on August 20, 2007

The following is an excerpt of notes taken by Whitney Tilson, co-editor of Value Investor Insight at Berkshire Hathaway‘s annual meeting in May 2007. For a more complete account of Berkshire’s recent annual meeting, click here .

Read the rest of this article in Forbes.com

Posted in Finance, Information Advice, Investing | Leave a Comment »

Living To Work Or Working To Live?

Posted by iBlog on August 20, 2007

Retiring to a golf community and living the easy life has long been one version of the American Dream.

But how many years can one person play golf for?

Read the full article in Forbes.com

Posted in Current News, Demographics, Economy Today, Finance | Leave a Comment »

Skype Still Struggling

Posted by iBlog on August 20, 2007

After Skype promised to fix a software problem within 24 hours, the online phone firm still has not restored service to all of its 220 million users, although some users in Asia and parts of Europe have been able to log on.

Read the full article in Forbes.com

Posted in Company Reviews, Finance, Internet | Leave a Comment »

Wall Street Awaits Feds Next Move

Posted by iBlog on August 20, 2007

So far, Wall Street, beset by fears that credit problems in mortgage and corporate lending will cripple the economy, has been stubbornly signaling to the central bank that it wants a bailout — ideally, by way of a cut in the benchmark fed funds rate.

Read the full article in Yahoo.com

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Googles Historic IPO Run

Posted by iBlog on August 20, 2007

You didn’t get in on the ground floor? Well, maybe you think you’re pretty smart anyway. Perhaps your money was lounging about in a beach house in Miami, one of the hottest real estate markets of the past few years. Perhaps you were wise enough to buy a hot commodity like copper. Or maybe you held out for the next big IPO.

Read the full article in BusinessWeek.com

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Money As In Value

Posted by iBlog on August 20, 2007

Money cannot be sought directly, money, like happiness, is an effect. It’s the result of a cause and the cause is valuable service. Keep money in its proper place, it’s a servant nothing more. It’s a tool with which we can live better, see more of the world. It’s the means to a happy, carefree retirement in later years. Too much emphasis on money reverses the whole picture, you then become the servant, and the money becomes the master…..

Be realistic about your financial goals. For as you reach them, you can then set higher goals. Trying to jump too far too soon can often result in confusion, tenseness and worry. Take your growth in sensible, logical steps, remembering that the big thing is that you know what you want and that you realize your rewards will match your service. That is, that you must devise ways and means of actually becoming the person who is worth the amount of money you have established for yourself. A person may be worth more than they’re getting, for a while, but the two will match up. They have to. In fact, unless a person is worth more than they’re now receiving, they cannot move ahead. They’re receiving all they’re worth.

THE IMAGES YOU HOLD IN YOUR MIND MOST OFTEN MATERIALIZE IN RESULTS IN YOUR LIFE.

Posted in Articles By Author, Business Psychology, Finance, Information Advice, Investing, Personal Finance | Leave a Comment »

China Eyes Investing On Private Equity, Hedge Funds

Posted by iBlog on August 19, 2007

The steep paper losses that China has suffered on its $3 billion investment in Blackstone Group will not deter its embryonic sovereign wealth fund from making further investments in private equity and hedge funds, according to a senior official.

Read the full article on yahoo news

Posted in Asia Business, China Global, Finance, Going Global, International Business, Investing | Leave a Comment »

Google Aids Account Planning

Posted by iBlog on August 9, 2007

SAN DIEGO Is Google a planning tool?

That was the contention of Penry Price, Google’s director of North American sales, who spoke here yesterday at the American Association of Advertising Agencies’ Planning Conference.

Read the full article in AdWeek

Posted in Advertising, Finance, Technology | Leave a Comment »

Making The Most of Your 401k

Posted by iBlog on August 9, 2007

Six steps to securing your financial freedom in retirement.
Here are six steps to making the most of your 401(k)–and securing your financial freedom in retirement.

Read the full article in Yahoo Finance

Posted in Finance, Personal Finance | Leave a Comment »

Do You Have The Right Investments?

Posted by iBlog on August 9, 2007

Once you’ve given up the notion that you can pick the next hot mutual fund, you can focus on the real key to investing for retirement. And that’s creating a blend of stocks and bonds aggressive enough to generate the returns you need but not so risky that your retirement savings will be decimated by market meltdowns.

View the full article on CnnMoney.com

Posted in Finance, Investing, Marketplace, Personal Finance | Leave a Comment »

Top 10 States For Taxes

Posted by iBlog on August 9, 2007

Find out what states love small business on CnnMoney.com

Posted in Finance, Small Business | Leave a Comment »

Retail Stocks Don’t Bail Out Just Yet

Posted by iBlog on August 9, 2007

Despite high gas prices, housing slump and a credit crunch, Americans are still shopping. Could this boost retail stocks in the months ahead?

Read the full article in CnnMoney.com

Posted in Finance, Investing, Retail Market, Stock Market Watch | Leave a Comment »

The Crash of 2007

Posted by iBlog on August 9, 2007

There is a really high probability that we are in the midst of a stock market crash, the first since 2002. This is a ridiculously dangerous prediction for a commentator to make.

Read the full article in Forbes.com

Posted in Finance, Personal Finance | Leave a Comment »

Japanese Retailer Drops Bid For Barneys

Posted by iBlog on August 9, 2007

TOKYO – Fast Retailing of Japan said Thursday it is dropping its attempt to buy U.S. luxury chain Barneys New York Inc., ending its bidding war with an affiliate of Dubai-based Istithmar PJSC.

Apparel designer and marketer Jones Apparel Group Inc. (nyse: JNYnews people ) said Wednesday it signed a definitive agreement to sell Barneys to a Dubai investment company, which was forced to sweeten its bid because of Fast Retailing’s counter offer.

Read the full article in Forbes.com

Posted in Asia Business, Current News, Finance, Retail Market | Leave a Comment »

Competitive Analysis

Posted by iBlog on August 7, 2007

Here’s How To Break It Down

Whether you are scoping out the market, researching your new product ventue or want the depths of your competition, a competitive advantage is key. Miss out on this and you may be missing out on a whole lot. Marketing a product with little or no knowledge let alone marketing without knowing what the competitive product is a big mistake. A competitive analysis gives you in depth facts and price points on your product. Below is an example of a competitive analysis featuring two competitive products sold and marketed on ebay:

Competitive Analysis

 Canon GL2 MiniDV versus Sony DCR-TRV950

Designed for the serious videographer-Impeccable picture quality that is better than the Sony DCR-TRV950-GL2 outperforms on manual audio control feature-Overall far superior manual control on GL2 vs. DCR-TRV950-Top handle buttons strategically placed for better creative shooting with the GL2 vs.   Sony which has no top handle button features-20x optical zoom out beats the 10x optical zoom of the Sony DCR-TRV950-Aperture F stops displayed with GL2 vs. DCR-TRV950 has no F stops to display-Neutral Density feature on/off option on GL2 vs. DCR-TRV950 has no such feature-GL2 lowlight/custom preset performance excels vs. DCR-TRV950 

Introduction The following sections will compare and focus on the capabilities/features of the Canon GL2 MiniDV Digital Camcorder Camera 20x versus the Sony DCR-TRV950 Camcorder. The GL2 camcorder offers high quality digital video up to 530 lines of resolution. Building on Canon’s expertise, the GL2 offers sleek innovative design, precision optics, excellence in manual control, digital processing, display of F stops, clear scan, top button placements, +18 dB gain level and custom preset that all make for great features to enhance the picture quality for the user  In summary, the Canon GL2 MiniDV Digital Camcorder Camera 20x is a better suited camera for excellence recording video and in the end result makes an ideal choice for the serious videographer. 

Performance The number of pixels has increased with the GL2 from 279K to 410K and gives the camcorder overall improved picture quality. The quality of the GL2 picture is sharp, professional and impressive and in the end result produces a better picture quality versus the Sony DCR-TRV950. 

Price The Canon GL2 has an MSRP price of $2,799 and falls between the $1,499-$2,799 price range. Consumers can expect to find an average street price for the GL2 around $2,400 or better.  

Overall Features Manual Audio Control The GL2 outperforms the Sony DCR-TRV950 on manual audio control by far. Located at the far back left near the top of the GL2 are the indicators for the left and right manual controls with dials located at the back.  

Button Feature Controls The accessory shoe of the GL2 is located near the camera lens. Almost all of the buttons are located and raised above approximately one inch from the top handle of the camcorder. The zoom toggle button and the record start stop button are located next to each other towards the back of the camera. The photo button is located just below.  The location of these buttons and features that were placed on near the top handle is ideal for creative shooting. The Sony DCR-TRV950 does not include such controls on near its top handle. The GL2 has an advantage on this feature because you are able to toggle record on and off button and easily be able to control the zoom feature button.  

20x optical zoom Every camcorder includes a manual zoom. When it comes to manual zoom control, the GL2 excels in offering the user ultimate control over the picture they are recording. The 20x optical zoom out beats the 10x optical zoom of the Sony DCR-TRV950 for the individual consumer hands down. This is because the GL2 offers a variety of options such as two zoom controls where one is located at the grip and the other is located at the top of the handle. Within the handle, you can set the speed option of the zoom variables to slow, medium or fast. The speeds of the top handle can also be set and the right side grip zooms independently for great precision.  

Outperformance The GL2 outperforms Sony DCR-TRV950 in with its aperture and shutter speed features in manual control. When you are in automatic shooting mode, you can use the exposure wheel to compensate the overall exposure by setting the exposure lock.  Clear Scan Feature The GL2 also includes a new feature on its shutter speed that is called clear scan. The shutter speed option is designed for adjusting the shutter speed based on the scan frequency of a television or a computer monitor. This added feature is a broader example of Canon including features to the camcorder with no extra cost, therefore showing respect to the individual consumer.  

F Stops Also with the GL2, you can set the aperture (depth of field) from F1.6 to F8 in 19 steps and the camcorder notifies you on the exact number of F Stops on the onscreen display. The inclusion of the numerals is a very helpful feature for the professional videographer. The DCR-TRV950 does not include the display of the number of F Stops. 

Natural Density  The Canon GL2 offers a feature that gives the consumer the ability to turn the neutral density filter on and off. No such feature is available on the DCR-TRV950. The GL2 camcorder has the advantage on the manual control feature because it is perfect to utilize for shooting bright scenes. 

3 CCD For Low Light Setting When you throw the GL2 camcorder into full manual, open up the iris, bring the shutter speed to 1/60th and turn the gain up to +18 dB your end result in utilizing the GL2 is an excellence performance in a low light setting. The better still performance in the GL2 excels over the DCR-TRV950 which because of the GL2’s slightly larger 3 CCD (charged coupled device) maximizing it’s capability of the DV format. The GL2 is able to bring in heavier light pixel than its competitor camcorder with its custom preset. 

Audio Canon concentrated on developing a solid audio camcorder within this model. The GL2 offers many audio options such as recording and monitoring than the Sony DCR-TRV950 does.         

Matrix This matrix examines the benefit of obtaining a competitive advantage through feature differentiation:  

Competitive Advantage 

Outstanding Features

                             

Consumer Care   

HIGH   DIFFERENTIATION

LOW  Conclusion When making a choice between the Canon GL2 Camcorder and the Sony DCR-TRV950 camcorder, I would recommend the GL2.  The GL2 offers better manual control which would be the overall reason for coming to this conclusion. The sleek innovative design, precision optics, digital processing, display of F stops, clear scan, top button placements, +18 dB gain level and custom preset all make for great features to enhance the picture quality for the user. The picture quality of the camcorder is very sharp with excellent lowlight performance. The camcorder is all about shooting video and is ideal for the consumer looking for great picture, manual control and excellence in video taping. If you are in the market for a camcorder that is in the $1,500 – $2,000 price range, the GL2 is a great choice. These are the valid reasons why the serious professional videographer would make the GL2 camcorder there overall product of choice. I’d strongly suggest to everyone to go with the Canon GL2.  

Jen Lyn 

 

Posted in Competition, Corporate Strategy, Entrepreneurship, Finance, Researching | 1 Comment »