The school principal doesn't come into her classroom
very often but, when she does, it's invariably to
make sure that my daughter Katie is working from the
right page in the right lesson plan for her first-grade
inner-city (not Boston) students. It's all
prescribed. Very little deviation is permitted.
Standardized teaching for standardized
tests.
No matter that the families of her 22 kids come from
10 different countries. No matter that each of them
has a unique learning style. And, especially, no
matter that some have progressed faster than others
in reading, or in arithmetic, or in self-control. At an
upper policy level, it's been determined that the
best way to control the output is to control the inputs.
So everyone gets treated the same way…
…until they start asking questions.
Katie was well into her fourth month of pregnancy,
and her condition was fairly obvious, except to her
(usually) self-absorbed first graders. In mid-morning,
in mid-lesson, a few weeks ago, her "little perfessor,"
Michael Nguyen, cocked his head to one side, put
one hand on his hip, and blurted out, "Mrs.
Bender, you're going to have a baby!"
"Yes, Michael," Katie responded with a great inner
smile, "how observant of you."
Class continued. Katie didn't miss a beat with the
lesson plan. But Michael's young brain was in high
gear developing his own learning curriculum.
Same day, a little later: "So Mrs. Bender…
how does the baby get out?" said Michael, who
then considered out loud several imaginative
possibilities before approximating an appropriate
conclusion. In Mrs. Bender's first grade, there are a
lot of questions. Some are relevant to the lesson,
some are relevant to life generally, and some are
relevant to a life in particular. Very few are irrelevant,
and none is ignored.
At the end of the day, recognizing that Michael's "how
does it get out?" was quite likely to be followed the
next day by "how did it get in there?" Katie called
Michael's mom with the heads up: there's a great
opportunity for overnight home-schooling.
Home-schooling typically is not a frequent recourse
for most small business owners. Most of those in my
network, at least, manage to stay current with their
industry, with general economic trends, and with new
issues that may have an immediate impact, such as
Massachusetts' Health Care Reform Plan. But too
often small business managers fail to recognize
— even when they're many months along
— when their company is about to give birth to
a steadily-developing financial issue.
Why?
Because most businesses are started by people
with a strong background either in product
development/operations or in sales and
marketing. Where are the financial
entrepreneurs? Starting financial services
companies.
The result? Relatively few small business owners are
able to ask non-standard questions in the financial
area, the kind that lead to pregnant insights and
informed action.
As one of those financial entrepreneurs, I
frequently get to ask the kinds of questions that lead
to the pregnant insights. I recalled a half-dozen
this week that led to major teaching opportunities for
me in 2007:
- What's the economic model for this
business? Analysis revealed that the
company was not economically viable on its own,
that its continued existence could be justified
primarily because of the benefits that it provided to its
sponsoring joint venture partner.
- Now that you're finally making money, how
come you never have any cash? Asked in
order to diagnose a problem with the debt structure: a
number of relatively short-term loans were draining
resources that were needed to fund growth. Financial
restructuring will result in new, longer-term bank
financing to improve cash flow.
- Who pays off the debt? Asked
when a high-dollar offer to buy one of my client
companies was enthusiastically received, before my
client realized that debt liquidation is usually the
responsibility of the seller. The net proceeds were a
significant 20% lower than first thought, leading to an
intense renegotiation prior to close.
- Why does the expense for salaries and
wages on this month's income statement equal the
sum of your three bi-weekly payrolls this
month? Asked as an introduction to the
subject of full
accrual accounting. The cash-basis alternative would
have left us distorting the results by recording six
weeks of payroll in the month of August.
- Why are you expecting to run short of cash
next month when the full financial budget indicated
an ample surplus? Asked as a reminder to
analyze financial variances consistently. In this case,
a full month's worth of progress billings was
overlooked.
- You have raised prices to cover your
increased product cost, but your gross margin
continues to fall. How come? Analysis
determined that as direct costs increased the
company raised its prices, but not proportionate to its
costs. Also, the lead customer, who accounted for
33% of revenues, turned out to be receiving an
average 6% discount, which reduced the margin by
two points.
Like my school-teacher daughter, I work constantly to
get my clients to ask the right questions and then to
help them find the answers. Unlike my daughter,
however, I've never had questions about my tummy.
But if my annual New Year's weight loss
resolution doesn't kick in soon, Michael Nguyen will
be cocking his head to one side and giving me a
knowing look, too.
