Find Your Finance Cornerstone

(This article is reproduced with kind permission of Mike Southon, international business speaker, weekly columnist for the Financial Times, entrepreneur mentor and co-author with Chris West of “The Beermat Entrepreneur” series of books).

Mike Southon says:  This is my column that will feature in Saturday’s Financial Times, which can be found in the entrepreneurship pages of the Money section. You can also find my columns on the FT web site here )

One of the symptoms of a credit crunch moving seamlessly into a recession is the unfortunate chore of the entrepreneur spending more time with their bank manager.

This might well be to obtain more credit to cope with a short-term cash-flow problem, or to explain the restructuring required to take best advantage of unpredictable market conditions. Whatever the desired outcome, this is unlikely to be a meeting which either party regards with keen anticipation.

The challenge is that the entrepreneur and the bank manager speak two completely different languages. The entrepreneur likes to talk about new ideas and opportunities, about changing the world and making a difference and being recognised in the street. The bank manager is probably under strict instructions from above to reduce the risk in their portfolio of accounts, and can only express this in the language of the spreadsheet and the bottom line.

Meetings between entrepreneurs and banks managers can be tense and sometimes even characterised by strong language. Many years ago in my first start-up our CEO went to open a bank account. He was back very quickly and in a bad mood, so we realised the meeting had not gone well.

In his view, the bank manager was an idiot; he had not understood how clever our CEO was, how we clearly had an unbeatable business proposition and how much money we all were all going to make, including the bank.

Our CEO was ultimately right about this. We did indeed sell the company for a lot of money only five years later. But back on day one we had a small problem; we did not even have a bank account yet.

Understanding finance is one of the toughest challenges for an entrepreneur, especially if they come from a sales or technical background. It is a very large topic with constantly changing rules, and it was a real challenge for Chris West to summarise this into simple terms in Finance on a Beermat.

West worked with finance experts Stephen King and Jeff Macklin, and while there are indeed chapters on double-entry bookkeeping and tax, the book starts with simple and straightforward advice: before you do anything, you should find yourself a Finance Cornerstone.

This is very unlikely to be a full-time employee from day one; most people have a ‘virtual’ Finance Cornerstone, someone who comes perhaps one day a month and puts some order to your receipts and invoices in preparation for submitting your accounts.

But we make an important distinction between an accountant and a Finance Cornerstone.

An accountant is essentially reactive; they will do your books and then tell you that you have gone broke. A Finance Cornerstone is pro-active; they tell you in advance that unless you do certain things, you will go broke at some time in the future.

Even if they only come in one day a month, they understand your business and can advise on how to scale up your business when times are good, and how to scale down your business when they are not.

Most importantly, they speak the language of the bank manager, and should always accompany you to any such meetings. The entrepreneur should make some introductory remarks, and then leave the running of the meeting to the Finance Cornerstone. In particular, any promises made about the provision of security or repayment of loans should be made by someone who not only understands the mindset of the bank manager, but who is also more likely to be trusted to keep those promises.

And if circumstances change and repayment terms need to be negotiated, this is best done by a professional, who will present a case that is based on facts rather than emotions. After all, the bank is in the business of lending money with interest, so as long as they think you will not let them down, they are more likely to be sympathetic to your cause.

In my first start-up we were lucky that another of our shareholders, the CEO’s brother, was a vice-president of Goldman Sachs, and thus able to smooth things over with the bank. If you are not in this happy situation, then I recommend one of the organisations that provide virtual Finance Cornerstones, such as King and Macklin’s company FDUK.

Alternatively, you can even ask your bank manager to recommend someone. I am sure they will be delighted to help.

Finance on a Beermat by Chris West, Stephen King and Jeff Macklin is published by Random House Business Books.

Finance on a Beermat (Second edition):
http://tinyurl.com/6jlpxj

Viddler Done Good!

Just in case you miss it in the comments, here’s a lovely personal email from Donna DeMarco @ Viddler.  As a fledging video maker whose partners regularly take the mickey out of the shaky panning, questionable taste in music (I like it!) and painfully slow action, not to mention how rough I look sometimes, the words in bold (the bold added by me so you can’t miss it) made my day! 

I am determined to press on with video as a marketing tool, so I am cheered.  The wordpress plug in Donna refers to, means you can comment on my blog postings with your own video recorded on the fly with your in-lappie camcorder – HOW COOL IS THAT?  C’mon, I dare you!  Get the lippie on and go for it.

“Good Day, I’ve just finished a breakfast here in the states – humble pie. My sincere apologies for suspending your account. We’ve been inundated lately with “cash gifting” ponzi schemes and “buy this now” videos. Not the type of content that represents the viddler community. The community can flag videos for various offenses, including spam & copyright. We manually delete the content on our backend based on the flags, title, tags, usernames, etc. We got over zealous when we saw “become a millionaire” in the title of a flagged video and suspended your account. Your videos are informative, well produced and interesting – You even have our wordpress plugin! I could try to blame it on the ghosts at Hazlewood Castle, but it is our mistake. And as a result, we are reviewing our process and will look into sending an email when an account is suspended. We’ve also instituted a “trusted user” status – of which you are now one.Thanks for using viddler!

Donna
co-founder, viddler

Viddler Account Back Up!

I know it’s April 1st but still…… my Viddler account is working fine now!  No explanation, no emails, but thank god for that as I was only thinking this morning how much nicer it is to use than YouTube.  Perhaps they were the victim of an April Fool’s Joke eh?

Viddler Suspends My Account!

Well, this Hazlewood Castle story gets even more intriguing!  Viddler appear to have suspended my account without warning of any kind!  I cannot believe that anyone – particularly Hazlewood Castle – can have objected to my content, and the only other video I had up there apart from my usual kind, was the one with the interview with Mr X about Runescape and that was very inoffensive.  I am very fed up as I have been happily embedding the Viddler videos in my blog and they are now showing as video not available.  I’ve spent a lot of time on this and to do this without even an email letting me know why, is really bad in my opinion.  I’m waiting to hear from Viddler now.