The Recession is Here – Protect and Prepare!

Well, after a pretty strong 2019 we’re truly in the toilet, economically speaking. The still active COVID-19, protests over police behavior and BLM, and the shut down/open up/shut down again guidance from our elected officials have pretty much guaranteed this is going to be a very bad year for many businesses. The question to as yourself is this: Does it have to be a very bad year for your business? We last answered that question for readers back in 2008, the last time we were faced with recession. The answers then were good enough to be repeated here, because evidence indicates that clients and readers who had the information at hand to protect their businesses and prepare for a stronger recovery did just that. Here are 4 reports you should have on your desk and 3 tips for allocating scarce resources that will ensure you’ll come out of the gate better than your competitors.

First, my 4 reports – top tools for protecting your business:

  • Report #1: Your minimum cost of doing business – your fixed nut, or as a client once called it – LODO, Lights On, Doors Open.
  • Report #2: Your earned Contribution Profit on each major item you sell, and on each of your top 10 customers. I’ve never seen a client not be flabbergasted when they saw this report for the first time.
  • Report #3: Your projected cash flow, in detail, by month or even by week if it’s tight, so you KNOW when you’ll need to tap your bank (assuming you’ve already taken advantage of any government aid programs available to you). Don’t forget loan forgiveness or repayment obligations.
  • Report #4: Your detailed P&L report in trend format – month by month, side by side, for 12 or 13 months, so you can see trends as they develop before they overwhelm. A 1-2% drop from last month is probably nothing; a 1-2% drop each month for the past 6 months is dangerous if you don’t know about it.

And my 3 tips for preparing for the recovery:

  • What projects are you currently investing in that you could postpone for 6 to 12 months without hurting your business today? Put them on hold and keep the money in the bank.
  • What projects have launched but aren’t  producing the results desired, requiring more funding to keep them going? Consider dropping them or putting them on ice for now, until later when the climate might make them more appealing to your customers.
  • NOW, where can you make an investment that will position you for market share gains when things turn around, as they always do? This is how you get ahead of the competition by seeing further than they can, and having the resources to back up your insight.

Want help? We do that. We are Your CFO for Rent.

Working from home? Here’s your technology preparedness checklist

Here’s a very useful checklist developed by Jerry Savin, CEO of Cambridge Technology Consulting Group, former national president of The Institute of Management Consultants, and one of the few tech experts who actually speaks English. He developed this list to help those of us who are working out of the office as a COVID-19 defense mechanism but don’t want to be hampered in our ability to work effectively from home and at the same time avoid being victims of those who would take advantage of the lesser tech support typically present in home offices. The link to his complete checklist is here:

Checklist for Remote Working

Lease or Buy – Which is Best?

This question still comes up regularly. Should we lease or buy the equipment we will need next year? About half the time the questioner is actually asking which method is least costly. So here’s the answer.

The answer will ALWAYS be: Leasing is more expensive. The leasing company is buying the asset you want, usually from the same source you would, and then leasing it to you. Another layer of operating cost and profit (the leasing company’s) has been added to the transaction, and their buying power will almost never lower your cost below what you could have gotten it for directly. If a lease sounds less expensive, you probably need help in negotiating a better purchase price.

So why lease at all?

The answer will ALWAYS be one of these:

  • To conserve cash, either because you couldn’t get a loan or couldn’t come up with the cash required for a down payment on a loan. Expect a very high lease payment because the lessor probably sees this as a high risk transaction.
  • To get credit from a new source without impacting your normal bank credit lines (which you’ll need later), or when your bank credit lines are tapped out and you still need more. Watch out for violating your regular bank loan covenants.
  • To conserve cash, but this time because your high business growth rate is consuming large amounts of cash to build inventory, finance receivables, etc. In this case the extra cost might be worth it if margins are high enough.
  • To sell tax benefits you can’t use but someone else can. Still raises the cost over an outright purchase, but often looks prettier at first blush.

The answer will NEVER be to save money.

This doesn’t make leasing good or bad, just more expensive than buying outright. Might there still be good reasons to lease? Of course, as we’ve hinted at in our bullet list above. But given the level of interest rates these days, you’ll want to take a hard look at leasing vs. buying to avoid making a financial mistake you’ll be paying for years down the road.

If this isn’t perfectly clear, please call us. We’d like to help.

Teachers Beware! Your Retirement Plan may be costing you way too much!

While teachers likely don’t read the Wall Street Journal, that newspaper does some very solid investigative reporting, and on October 2019 they reported on one such investigation around the high cost of many 403(b) retirement plans. Costs were sometimes much higher than justified in many of these plans because sales agents for insurance companies used deceptive sale techniques to gain support and enroll subscribers.

How to protect yourself? Ask the hard questions and don’t accept general answers. Read the fine print when the presenter stands to earn money from your purchase, because they have a strong interest in your buying their product, perhaps much stronger than their interest in protecting you from exorbitant fees.  AND learn the basics of financial management for yourself, because you are your own best advocate. Grab a copy of my book “Financial Mastery for the Career Teacher”, Corwin Press 2014. You will learn how to manage your money more effectively with chapters covering such key areas as:

  • Your personal business plan
  • Managing debt, life insurance and savings
  • Buying a home
  • Investing in the stock market and/or real estate
  • Retirement planning, wills and trusts
  • How manageable technology can help you

Find it on Amazon or other online book sellers. All from Your CFO for Rent®

Not So Kind Words From a Nasty Competitor

When someone uses your registered trademark without permission, it’s important that you challenge that activity, and police illegal uses of your valuable marks. Otherwise you risk losing the right to it. That’s one way of abandoning your rights to your trademark. So, we police our valued registered trademark regularly, and recently found a Google ad placed some time ago by a Phoenix-based firm called B2B CFO. When we advised the owner of the violation he was actually indignant that someone would dare bring it to his attention. His response to us:

“CFO for Rent is a horrible trademark and we do not want our good name associates with such trash.” Then a bit later: “You are an ass-hole, Gene. We will not do anything about the matter. Please hire an attorney and sue us.”

Charming, huh? I’m thinking this is someone who represents the integrity of the CFO in their image to the world, but who is that arrogant about violating others’ rights. Hmmm. If I were a company CEO, would I really want them advising me on financial and strategic matters? On risk management? Food for thought.

What’s keeping inflation down?

I just read an excellent article on this topic, compliments of Bob Kelly of Capital Group’s Private Client Services. I wanted to share it with you, via this link:

No comment from me needed, the article speaks for itself. As always, we welcome your thoughts, comments and questions.

About Knitting and Systems Evolution

Alert: This is not a techie post about bits and bytes. It’s about making good decisions when your internal growth requires support from outside your company in an area that is not your area of expertise. And it’s from an actual case history, although the end to the story is yet to be written.

A company in the chain fast food restaurant business had grown significantly over several decades, to the point where their internal HR systems would no longer support the huge hiring, management and turnover needs of their large part-time worker force, which typically experienced upwards of 100% turnover each year. Added to their needs were the requirements of their franchisor, including mandating seamless integration with the franchisor’s HR systems. So they decided to go outside for a new system that would satisfy their data needs as well as those of their franchisor. Without an internal IT department to assist (red flag #1), the process was managed by their VP of HR, who had never managed such an effort before. Despite advice to the contrary, he declined to engage an outside IT advisor to help manage the process (red flag #2). He was clear on what he wanted to see, and the selected vendor sales team assured him they could provide what he wanted (red flag #3). The transition was long and costly, but it was expected to increase data visibility and reduce internal HR staffing.

Well, they couldn’t and it didn’t. After struggling to make it work for over two years the company decided to scrap that relationship and find a different vendor. This time they engaged a skilled outside IT consultant to advise them and help evaluate prospective vendors. Several vendors appeared well qualified in the eyes of their advisor, but now the cost of a transition was even larger than the first time around. The company balked at the realization that they were going to incur another high transition cost in addition to the inevitable strain on staff time already stretched by compensating for the shortcomings of the vendor they had. Caught between the proverbial rock and a hard place, they opted to stay where they were.

No happy ending here, it would appear. But perhaps a lesson for others facing a similar set of choices. We frequently read advice to companies to “stick to their knitting” – do what they’re really good at, and get someone else to do the rest. That is really good advice. And with the light speed at which technology is evolving today, few companies can afford to keep current with only their internal staff as a resource. This applies to many areas of support that companies rely upon outside their normal core competency: human resources, finance and accounting, supply chain management, and of course technology.

In other words, companies should look for opportunities to outsource those functions they can’t do well rather than drain valuable resources trying to do them badly.

And that’s the moral of the story.

We are your CFO for Rent®


How to Deal with CFO Retirement

The Wall Street Journal reported recently (7/18/19) that CFOs of public companies are retiring at the fastest pace in over a decade. Exit rates of nearly 18% annually are now thought to be higher than for CEOs, a historically high turnover job. The trend, captured by a survey commissioned by the Journal, is said to be the result of a variety of factors:

  • the increased pressure on today’s CFOs to respond to an increasingly aware – and critical – investing public,
  • the often added responsibility of operations, technology, talent management and human resources, often requiring more and more time spent on the job,
  • increasing involvement in setting strategy and executing deals,
  • M&A deals that accelerate vesting of restricted stock options,
  • and, of course, normal retirement age decisions.

What does that mean for the CFOs of non-public companies? While they don’t typically get the visibility of their public counterparts – and they don’t have the cushion of cashing out restricted stock options – the same pressures are often felt, maybe even more acutely because the typically smaller organization size presents fewer options for offloading those pressures to skilled executive team members. And, of course, many private company CFOs have not had the opportunity to grow into these areas before having the responsibility. Some universities offer programs aimed directly at this market. Harvard, Wharton, University of Chicago and Stanford all offer such programs for enhancing CFO skills in strategy, leadership and communication. The challenge is getting the off-site training while also having to be in the office doing the job.

The silver lining in this could be the opportunity to present subordinate managers in privately held companies with career enhancing growth education that builds employee loyalty, makes employees more valuable to the company, and enables CFOs to manage more and execute less.

What might that look like?

Some of the readily available options include payment for online courses offered by specialized educational resources like or in-person courses at local universities. More generous options could include financing an MBA program or Master’s degree, or at the high end individual professional one-on-one coaches. As the cost goes up, so does the opportunity to tailor the training to the individual. And so does, presumably, the gratitude of the employee whose career is being enhanced by their employer.


Advice for Non-digital Business Owners

First, full disclosure #1: “Non-digital” may not be a real word, but it’s my attempt to identify those businesses whose owners don’t rely on the Internet for their business and don’t think they’ll ever have to. Think: Blockbuster, Radio Shack, Borders, Polaroid, etc. Because they were huge they were a visible target, and they became obsolete in a couple decades by the power of technology. Because you’re not huge, it would be a mistake to think you’ll never be a target. Think of the little bookstore that used to be in your neighborhood. Thoughts for reflection on that idea is the subject of this post, as you contemplate your next strategic planning activity.

Next, full disclosure #2: This wisdom is not mine, but it’s the recent post of an entrepreneur that I interviewed many years ago for my newsletter, and who still has words of wisdom to share with every entrepreneur/business owner.

Finally, go to Dave Berkus’ latest post at his website and consider how this might touch you:


Employment Law Surprise!

In a recent California court case, a female employee was hired at 5% over her last salary with a prior employer, a starting wage policy the new employer followed for everyone. A while later the employee found that male workers doing similar work were paid more, likely because they had earned more at a prior job. So she sued her employer under the Equal Pay Act. And won. The court ruled that prior salary cannot be used to justify a wage differential, as it is not a legitimate, job-related factor.

Source: Rizo v. Yovino, per Fisher & Phillips LLP

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