For full disclosure – he is my husband and also Next Stage Solution’s Clerk!

According to IC, only 30% of corporate assets are tangible, what about the rest? Knowledge assets are simply not measured, leaving 70% on the table. Today we have no good approach in how to account for the changes, not short term nor long term and certainly not in terms of inclusion in Financial Reporting. The book divides the knowledge intangibles into three classes of assets: human, relationship and structural capital and every chapter provides a set of tools.

Working with early stage companies, I often found push back from CEOs not wanting structure for their businesses, as it was viewed as a hindrance to innovation and entrepreneurial thinking. Intrigued by this fact, I wrote an article From Dissonance to Harmony to emphasize the importance of striking a balance between no structure and a hierarchical structure within the innovative community. I agree with the book that today’s business must have fluidity and flexibility and be an engine for ongoing learning, to allow for new thinking and better ways of problem solving from all employees with the ultimate goal to bring best value. Since the Google phenomena and vast technology advances, we have moved further into the knowledge economy. The authors were right on in suggesting leading as a conductor (horizontal) rather than the more traditional as the commander (vertical). I love that vision.

Another intangible asset is collective knowledge, a topic near and dear to me and how I believe Next Stage Solutions (NNS) is evolving. IC points out that markets coupled with technology today move so fast, that no one person can have all the information. This is certainly true in financial services where rules and regulations are changing almost daily. Within NSS, we work as a team of senior level financial experts exchanging ideas and solutions empowering each member to greater knowledge on behalf of our clients. The book explains how shared knowledge multiplies and emphasizes the necessity for value creation.

It continues to describe how it is imperative that a business today examines what its core competency is and looks at outsourcing all other aspects of a business. This leads in their opinion to the relevance of strong external partnerships or ‘relationship capital’ where what is not core to you is core to your partner, collectively creating a powerful engine, what the authors call a Knowledge Factory, displayed creatively with Legos in the book. The importance of networks and technology are significant facets of doing business.

All in all, I loved this book because it describes so well in how to think about a 21^st century business. It validates NSS’ approach in many aspects, but more importantly for me, it gives me tools and metrics in the continued development of our knowledge and innovation strategy. The Knowledge Factory demands that we look at our business holistically and all involved must be engaged. Only then does the collective knowledge fuel our economic engine.

Make sure to get a copy of Intangible Capital today. The flexible business model is here to stay. It includes a mapping of the networks, multiplicity of goals and benefits with bottom up thinking. Congratulations to Mary and Michael with the publication of this innovative and pioneering book, helping businesses look at intangibles in a better way for doing business today and the future. Let’s continue the discussion in how to account for intangibles in business valuations and in our financial reporting.

Title: Intangible Capital, 2010
Authors: Mary Adams and Michael Oleksak
Publisher: Praeger, Santa Barbara, CA
ISBN: 978-0-313-38074-7

Most Satisfying: In your CONTROLLER work you have done in the past, what is the most satisfying feedback you got from the CEO?

Nineteen out of twenty client companies have offered me a full time position during the engagement.

Most Inventive: Given that as CONTROLLER we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

I began a two person project to determine why a major bank’s ATM conversion had an out of balance total of $19M after the merger of the two banking systems.   The bank booked a 200k reserve to cover this reconciliation exposure.  I requested a Bank Tiger team to assist my current consulting team and at the end of the project we had completely reconciled the account and were only unable to account for $9k in bank funds.  We also discovered a major systems glitch that was the result of the systems merger and trained the banking staff to recognize the problem and how to correct the system if it occurred again.

Most Positive: CONTROLLER’s have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was assigned a project to take over for a Director of Finance at a specialized moving van company.  I first determined that there was a massive amount of misspending going on and no one was managing the AR accounts.  In 6 weeks we were able to make enough corrections that company was stable enough for sale to a much better funded and staffed regional carrier.  The sale of this business unit saved 250 staff member’s jobs as a result of the merger instead of a company closure due to prior management neglect.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Why of Work: How Great Leaders Build Abundant Organizations That Win by
David Ulrich and Wendy Ulrich

Funniest Fact: Tell us something funny about you.

I am crazy about WWII aircraft that have massively supercharged engines that “go fast, stay low, and turn left!” also known as the National Championship Air Races held each fall in Reno, NV.  The only rules are that these planes must have a prop and straight wings.

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

The most satisfying feedback I received is when the CEO told me that he knew he could spend a considerable amount of time out of the office (with customers, investors, board members, press, etc.) knowing that everything back at headquarters was being looked after with me looking after things.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

When we moved a company from California to Massachusetts, I had to build a complete infrastructure pretty much from the ground up.  This included the recruitment/interviewing and engagement/hiring of new corporate attorneys, external auditors, Accounting Manager, Office Manager, and Human Resources Manager as well as establishing new banking relationships and corporate insurance programs.  All of this had to be done in a matter of three months.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

When I was European Controller for a large networking company, I had eight country controllers reporting to me.  Some of the countries (like the UK and Germany) were larger contributors to the results of the overall operation than others (like Spain and Sweden).  In that environment the controllers for the larger countries tended to be more influential in group decisions and the controllers for the smaller countries would sit back and complain that their needs were always overlooked because of their size.  This ultimately led to a team that did not work very well together and this was reinforced by pre-existing cultural differences.  One of the things I did to turn this around was to solicit ideas from the controllers concerning topics to be covered in an upcoming quarterly staff meeting.  When the time for the meeting came, I appointed the controller who suggested the topic as the leader of the discussion leader and subsequent action items.  This forced the smaller countries to play a much more active role in the group in identifying their issues and forced the larger countries to sit up and listen and help find solutions as they were cast in more of a “follower” role.  Following this pattern in subsequent staff meeting resulted in a much more cohesive pan-European staff.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

“Leadership in the Era of Economic Uncertainty:  The New Rules for Getting the Right Things Done in Difficult Times” by Ram Charan, McGraw-Hill.

Funniest Fact: Tell us something funny about you.

My fraternity brothers used to call me “Howard”, which is my middle name.  They thought that it was an “amusing” middle name, so they thought they could get me going if they kept calling me by that name.  It worked for a while but the nickname stuck throughout college and they will even use it today in those rare occasions when we get together.

Stay tuned for our next team member’s story!

Program Highlights:

• Life Science companies with fewer than 250 FTEs eligible
• Project expense years: 2009 and 2010
• Maximum cash or credit amount: $5M
• Multiple projects/applications can be submitted
• Forms and Instructions are now available
• Application decisions will be made within 30 days
• Applications are due no later than 21 July 2010

Introduction:

One of the results of the Health Care Reform Bill was the appropriation of a poll of $1 Billion in tax credits or grants to support the costs of research by small and mid-size life sciences companies paid or incurred in 2009 and 2010. This program is advantageous for companies without income tax liability.

Subject to some exceptions, the QTDP (Qualifying Therapeutic Discovery Project) credit or grant is available to any business with 250 or fewer employees at the time the application is submitted. No applicant will be allocated more than $5 million in QTDP tax credits or cash grants and because of the wide open application process most winning projects will receive less than the requested amount and completion is expected to be very intense.

Applicants will choose between the tax credit and cash grant during the application process.

The final deadline for application submission is 21 July 2010 and submissions after this date will not be considered.

Application Process and Selection Criteria

Life sciences companies must apply to the Treasury Department for an allocation from this incentive pool using IRS Form 8942. The Treasury will approve or deny applications within 30 days of submission.

A QTDP is a project designed to achieve any of the following objectives:

• To treat or prevent diseases or conditions by conducting pre-clinical activities, clinical trials, and clinical studies, or carrying out research protocols, for the purpose of securing approval of a product by the Food & Drug Administration or Public Health Service,
• To diagnose diseases or conditions or to determine molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapeutic decisions, or
• To develop a product, process, or technology to further the delivery or administration of therapeutics.

In addition to the life science component of the selection process the financial impact of the QTDP will be reviewed to determine which submissions will likely:

• create and sustain (directly or indirectly) “high-quality, high-paying” jobs in the U.S., and
• advance U.S. competitiveness in the fields of life, biological, and medical sciences.

The following entities are not eligible for this program:

• Foreign businesses unless more than 50% of their income from the relevant project is subject to U.S. federal income tax,
• Federal, state, or local governments,
• Tax-exempt organizations,
• Partnerships or
• Other pass-through entities.

Additionally, the following are not eligible project expenses: CEO and other officer’s compensation, interest expense, facility maintenance expenses, service costs or such costs as determined by the IRS.

The QTDP credits and grants are subject to recapture if the patents or other resulting property are transferred within five years.

An applicant must complete a separate IRS Form 8942 for each QTDP for which it is seeking a QTDP tax credit or cash grant and this form is due for release 18 June 2010.

The following is a summary of the QTDP Credit Project Credit established in by the Health Care Reform and by IRS Notice 2010-45.  Interested applicants should thoroughly review IRS instructions and form 8942.

Please feel free to contact Lauriston Taylor at Next Stage Solutions; if we may assist you in any way.

Lauriston Taylor, Controller Consultant

o:  617. 449.7728, x-712

c:  978. 397.6412

f:   978. 339.5202

The GPS of Finance

NSS provided this hand out:

Flexibility

Keep your company nimble, lean and focused.  Just as large companies have divested non-core competencies, carefully consider which aspects of your business should remain fixed costs and which should become variable.  This keeps your business capital efficient and brings greater flexibility in moving your business forward.  Consider outsourcing non-core functions such as HR, finance, legal, sales and marketing.

Focus

Take a look at your lines of business in product/services and analyze closely which lines are using what resources.  If you have a product that takes 70% of your resources and represents 20% of your revenue, you have a problem.  Evaluate your customer/client revenue streams and determine what portion of total revenue each contributes.  Customers/clients that make up more than 30% of total revenue may in fact be a danger to your long term stability.  Stay diversified and avoid relying on one or two big clients.

Working Capital

Cash is always King.  In this recession, keeping cash flow positive has been harder and harder to achieve, especially for small businesses.  Where once monthly cash flow checks were adequate, today a daily/weekly Financial Dashboard is a necessity.  Financial Dashboards give you key financial indicators such as accounts receivable and inventory turnovers, working capital and current account ratios. Know at all time what your 6-month cash flow looks like and what action you may need to take.  Look beyond the ratios to get a regular pulse of industry trends and changes in technology.  Keep an eye on what the competition is doing, and check their press releases, stock prices and other activities that could impact your business negatively.

Equity/Debt Financing

Equity investors are still in flux.  With the financial meltdown, they have become somewhat more risk averse, leaving a bigger capital gap.  However, many are also making continuous investments and new, smaller funds are being created.  Bootstrap as long as feasible and build your revenue streams or user base.   This will enhance your business valuation over time.  Once you decide to raise funds from  equity investors, take the time for due diligence and investigate what type of equity funder would be the right fit, understand the investor’s needs and interests in terms of size of funds needed, industry expertise and support.

On the debt side of financing, try to diversify your banking relationships, the old ‘do-it-all’ approach is no longer an optimal solution.  Many local banks are starting to lend again, but mostly to businesses with strong balance sheets. There are various financing solutions to consider such as Accounts Receivable, equipment and real estate financing. Consider carefully all details in the term sheets and other agreements and evaluate the different options with extensive cost/benefit analyses.

Opportunities for Growth

With robust financial planning, a recession can provide opportunities.  Growth may not be achieved the same way as before, as direct sales may be impacted by the economy.  Consider the option to grow via merger or acquisition of a:

• technology  that brings greater efficiencies
• business with additional products diversifying your product line
• business with different distribution channels

Even a small company can gain greater market share, but this is only accomplished with a strong financial strategy and a solid understanding of managing and balancing risks.  If you are too risk averse you might miss a valuable opportunity and if you are too risky you may compromise the business.

Financial Strategy

Now more than ever you want to revisit your long term strategy.  In this current economic climate it is essential to have multiple roadmaps and be ready to take detours.  Being a productive CEO or business owner gives you a competitive edge.  Every downturn or recession brings opportunities; know what they are and plan accordingly by developing cost/benefit analyses of your options and revisit them regularly.

2010 will still bring some uncertainties and having the best team of experts will make it a better ride.  Have a 6-month, 18-month and 36-month strategy with milestones and execution points you want to accomplish. Share your short-term and long-term goals and objectives with your employees and create a culture where problem solving, networking and business development are everyone’s business.

We can help!

We thank you for attending this first of four seminars.  If you have any questions or specific issues around best practices in finance and growth for your business, we would be delighted to provide you with a consultation free of charge.  Please contact Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc. at 617-449-7728 ext 704 or email at scheiberkurtz@nextstagesolutions.com to set up an appointment.

We are pleased to announce the first of four

CEO Seminars  |  Tues March 23, 2010

7:30am -9:00am, 75 Federal Street, Boston

(offices of Furman Gregory Deptula)

RSVP: Rudi Scheiber-Kurtz at 781-929-9125 or scheiberkurtz@nextstagesolutions.com

The “new” economy brings its own set of challenges to companies who want to grow or plan an exit.

In the first of 4 seminars for CEO’s in 2010, we will begin by focusing the discussion on various ways of balancing the risks in our businesses.

• How can I build out infrastructure and create a model that is both flexible and adaptable, one that can constrict and expand with minimum costs?
• What value can I bring to my business by outsourcing any non-core competency to keep agile and nimble?
• What are the next-step tools and solutions in how I can achieve desired growth in a recharged economy and preserve cash with a conservative budget?
• How do I finance growth in today’s economy?
• What innovative strategies can I adopt to increase value in my business that may not involve raising capital?

Join us for a 90-minute interactive dialogue and take back valuable insights from other fast growth CEO’s.  Learn tools, tips and trends to help you navigate in this new economy.

Attendance will be limited to allow more in-depth and interactive discussion. Future seminars will focus on specific topics such as financing, sales and marketing, legal, partnering, and exits.

Why you should attend:

• Network with other CEO’s and gain visibility to best practices in the marketplace today
• Develop new partnering strategies for growing your business
• Learn how to avoid pitfalls of outsourcing key aspects of your business
• Gain critical insights into key legal, financial, and human capital issues in 2010 that will impact your business

Location: 75 Federal Street, 9th Floor, Boston, MA at the offices of Furman Gregory Deptula

Time: 7:30am Continental Breakfast

Program: 7:45am – 9:00am

RSVP: Rudi Scheiber-Kurtz at 781-929-9125 or scheiberkurtz@nextstagesolutions.com

Sponsored by:

NSS congratulates the 11 outstanding women!

The 2010 honorees, their titles, industries and locations are:

Marcie Black, Chief technology officer, Bandgap Engineering Inc., Photovoltaic systems, Woburn

A.G. Breitenstein, Vice president and general manager for provider markets, Humedica Inc., Healthcare IT, Boston

Catherine Crawford, Senior technical staff member, IBM Corp., Supercomputers, Bedford, N.H.

Lauren Crews, Technology coordinator, Raytheon Co., Defense, Andover

Elizabet de los Pinos, Chief executive officer, Aura Biosciences Inc., Biotechnology, Cambridge

Michelle Dipp, Vice president and head of the U.S. Centre for External Drug Discovery, GlaxoSmithKline plc, Biotechnology, Cambridge

Jill Drury, Associate department head, The Mitre Corp., Robotics, Bedford

Candace Fleming, Chief executive officer, Crimson Hexagon Inc., Social networking, Cambridge

Katie Hall, Chief technology officer, Witricity Corp., Electronics, Cambridge

Dava Newman, Professor of aeronautics, astronomics and engineering systems, Massachusetts Institute of Technology, Aerospace, Cambridge

Livia Racz, Division leader for advanced hardware development, Charles Stark Draper Laboratory Inc., Electronics, Cambridge

I agree wholeheartedly with Flandez’  assessment  that an outsourced interim or part-time CFO is a capital efficient way to access this expertise and an outsourced CFO can be more objective and give a reality check. I also agree that many of the CFOs are indeed CPAs and this is partially due to the Sarbanes-Oxley Act of 2002 (SOX)  that has driven businesses and their CEOs more to the compliance and technical side of finance enforcing the common belief that if you have a controller and an accountant your financial needs are covered.  That may apply to life style companies who do not intend to grow but simply run a sustainable business.

From this juncture, however, is where I begin to differ.  A company with expansion and growth in their forecast, the paradigm has to shift drastically from technical to strategic. In fact, not recognizing the importance of strategic finance and solely relying on your controller’s risk aversion, you may be holding your company back from that growth.  Here is why I think so.

For a fast growing company, the financial spectrum has to be broader and therefore more complex as pointed out by the author of the WSJ article.  You want to consider a broad based and strategic CFO, one that picks up where the CPA or controller leaves off.  The CFO is your business partner and brings a strategic organizational mind set to the discussion and understands the importance of mapping out the corporate strategy into multiple roadmaps.  Given uncertain economic times, this is more important than ever.  Finance for emerging businesses brings a complexity that is more than accounting and number crunching.

The CEO needs to fully understand the financial ramification and bottom line each decision triggers. SOX compliancy has driven us too far towards the tactical aspect of finance forgetting the importance of looking forward, checking your Financial Headlights.  The CFO plays an important role acting as conduit to growth and walking the fine line between the risk-averse controller and the visionary CEO.  Your future CFO needs to have average appetite for risk, not too little and not too much, understand how to translate the corporate strategy and be a true value creator and not a gatekeeper of growth.

Rudi Scheiber-Kurtz, CEO
Next Stage Solutions, Inc.