Financing Your Business: Closing Thoughts

As this series comes to a close, I wanted to add a few things.  I left off many of the more odd forms of business finance.  The ones that I have discussed are what I would say are the most typical.  There are more.  In fact, there are so many varieties that it boggles the mind.  Some of these are for rare situations.  Others are for specific industries.  If you are unclear of what you are being offered, drop me a line.  I am happy to talk to you about it.

Some of these financing options come at really high interest rates.  Credit Cards are generally very expensive if they hold a balance.  The better credit that your business has, the more likely you can get a lower rate.  There are business credit counsellors that can help with that as well.

There is a natural tension in the Accounting world between Credit and Taxes. Saving money on Taxes means you are lowering your Profit.  By doing this, you lower your ability to obtain Credit.  There is no way around this except to identify the ways that you have lowered your taxes and keep them separated from other expenses.  This can allow you to show a lender or investor what you have done.

Finally, I want you to think like an investor (and lending is a form of investing).  They want to know how they are going to get their investment back with a rate of return.  A CFO that I worked with said once that they (investors) don’t care if you make dollies or donuts.  What they want is to make money.  The primary vehicle to communicate this is a Business Plan.  If you don’t have one, get one.  Learn to make it a living document and understand your numbers.  Again, feel free to contact me if you don’t know how that works.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

 

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Sonoma County: News and Notes

This week we are going to go over Autodesk’s results for its most recent quarter.  The story has been very good for them so it is important to take a critical look at where they are going.

Let’s start with the basics.  The company had $501M in Revenue and lost $0.66 per share.  Again, the company is in the conversion from Sales of perpetual licenses to a subscription based service.  This has caused this apparent loss but if I look at the Cash Flow statement the company only burned $27M in cash out of a total of about $1.6B on the books.  So, the company should complete the transition before it runs out of cash easily.  Autodesk also projected between $505M – $515M in revenue for the next quarter and a loss of $0.58 – $0.64.  It should be noted that the loss narrows to $0.12 – $0.16 if accounting charges (non-operating considerations) are omitted.  The good news is that these metrics are all better than expected.

So, I want to say something about “Beating the Street” or a “Miss against Expectations”.  The Sell Side Analysts on these calls will generally put out a note a day or so after the call.  They use the transcript of the call and the numbers provided by the call to give some thoughts about how the company is doing and where they think the price will go.  What they don’t do is deep market analysis by calling customers, studying market research, deeply studying competitors or any other type of detailed work.  They simply have too many companies to cover and so much analysis is surface layer.  All I am saying is that this is not PhD work.

As to Autodesk, I want to put forth some numbers.  Non-GaaP Operating Expenses (excluding all those non-cash, non-operating expenses) are $464M (from the Press Release).  Non-GaaP Gross Profit is $435M so on an ongoing basis the company only needs to close about $30M in Profit.  That equates to about $534M of revenue.  That number will not be done in Q4 (which ends 1/31/18), but should be achieved next year.

I saw an Article on Seeking Alpha that talked about the stock being at or near its peak.  I don’t work on those kinds of terms.  What I can say is that this transition shows great evidence of work and the company has a solid foundation.  They have some more transition to complete and I look forward to seeing more results from them

Have a great day!

 

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Financing Your Business: Crowdfunding

You know some people think that Crowdfunding is really something new.  In a lot of ways, it is not.  Crowdfunding works a lot like raising money for a non-profit.  In a non-profit, donations are given to a cause that someone believes in.  They feel that the particular group will spend the money well.  About the only difference in Crowdfunding is that normally there is a “perk” involved.  I think this is akin to the way that PBS stations raise money when they say that a donation of a specific amount will get you a gift.

The biggest difference with Crowdfunding is that the companies are using specific technology platforms to do this Capital Raise.  This gives better visibility than most non-profits get because they are able to use technology to get the message out.  One other difference is that generally Crowdfunded projects are funded in a binary way.  If they do not get the money requested, then they get nothing.  If you donate to a non-profit, then you hand them cash.

Now, the bigger problem is in the details of the spending.  I am sure we have all heard of abuses in the non-profit business.  You can find examples across the board that the Charity uses very little of its funds to deliver actual services and instead enriches the people that run it.  The same is true with Crowdfunding.  The most obvious example is Oculus.  This was a company that was completely funded through Kickstarter.  Then poof, it sold itself to Facebook for about $1B.  The original funders got no part of the payout.

So there are challenges with this kind of funding and one of the differences is that you do not need to be an accredited investor to participate.  If you remember when I posted about this, it takes a lot of money to invest in startups.  These forms of giving are excempt from those rules and thus have a somewhat higher likelihood of problems.

But if you have a project or a company that is as much cause as it is business, then you should consider Crowdfunding.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Sonoma County: News and Notes

I want to cover Keysight’s Q3 results this week and finish our quarterly calls with Autodesk’s next week.  Love to go out on a positive note.  For Keysight, Q3 saw Revenue of $832M and a Loss of $0.10 per share.  This latter was greatly impacted by some accounting changes associated with the Ixia Acquisition and without that this would have been a Profit of $0.61 per share.  Last year the Revenue was $718M and $0.63 per share.  This means there was growth in Revenue but not in Profit.  The Revenue Growth is associated with the Ixia Acquisition, which did just over $120M/quarter at the time of the purchase by Keysight.  The Q3-2017 Revenue was also impacted by some adjustments to the Deferred Revenue that Ixia had.

So, all of this makes it hard to give one an accurate picture of what is going on.  The company declared a great quarter with good year over year growth.  However, I can not see how this is really a gain of 3% in Revenue year over year and slightly down in profitability.  The next quarter looks to be a bit better year over year, but we will need to see it in practice.  This more favorable Q4 guidance is what looks to have moved the stock from something in the $36-$38 range to the $39 – $41 range.

I want to talk about some of the things that are going on with why there are these changes in Deferred Revenue and Amortization.  Companies often have policies around how things are accounted for.  Though you would think accounting would have very strict rules, there are many places where their are rules that are really handled through policies.  For example, when does a significant purchase count as an Expense and when as Capital Equipment.  In that latter case, the Equipment is depreciated on a schedule.  That schedule itself can be varied based on policy.  All of this is well within the bounds of legal accounting practices.  Often times companies have different policies and if they combine there are adjustments that need to be made to have their finances run under a single policy.  That is one reason you might hear about “1 Time Charges”.  These adjustments often flow through the Income Statement, but have little or nothing to do with the actual Cash or Profitability of a Company.

The other thing here is that the Company is clear that it is going to attempt to return the profit to the shareholders through acquisition.  That can be a challenge for shareholders as many acquisitions don’t work over the long haul.  The jury is still out on Anite and Ixia.  The company has spent around $2B in these acquisitions.  At the moment, the best I can say is that they definitely fill in gaps in the company.  The question is whether they will be worth it over just giving the money back through a dividend.  I suggested about 2 years ago that the company start a $0.25/quarter dividend.  If that had been pursued, then $2 a share would have been given back so far.  Think about that.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!