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Books: Michael Gonnerman -"Ask Mike"

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Mike Gonnerman = Dartmouth Entrepreneurship
A few years back, The Dartmouth Entrepreneurial Network, "DEN"
was just a fledgling concept of Gregg Fairbrothers, it's executive director.
Upon learning of the endeavor, Mike drove to Hanover to meet with Gregg.
At the end of that meeting, Mike stroked a check to help support the cause.
It was the very first donation made to the Dartmouth Entreprenurial Network,
which to day is alive and well in its own business incubator near the Med School.
Annually, Mike presents at DEN's Greener Pastures... a yes, still strokes a check. 
This year his was personally recognized from the podium by President Wright
for his unwavering contributions to Dartmouth Entrepreurship.



"Ask Mike" (Gonnerman '65)!

August 22, 2006


Back in 2002, Gregg Fairbrothers '76 and I sat around a table in the offices of the Dartmouth Entrepreneuerial Network, trying to think about an activity or event that could alert Dartmouth alumni, as well as faculty and staff, about the new initiative we were launching about entrepreneurship. Someone suggested we have a conference, but there was no consensus on how or if to proceed.


Mike Gonnerman '65 happened to visit us as we were talking about what we might do. We hadn't resolved the issue when it became time for Mike to leave. After a few minutes, he returned, put a check for $1,000 on the table, said, "just do it," and walked out of the room for good.


Five years later, we're getting ready to launch another edition of Greener Ventures, our annual conference on entrepreneurship. The conferences have been a huge hit, attracting more than 2,500 Dartmouth alumni, faculty, staff, students, and friends for a one-day conference on entrepreneurship.


If it weren't for Mike, it might never have happened. Now Mike's published his first book and it's time to return the favor. Ask Mike is a collection of questions and answers published in his newsletter, some of which we've excerpted in the quarterly newsletter of the Dartmouth Entrepreneurial Network. You can buy the book here. It's practical, straight-forward, and just the sort of the advice that an entrepreneur needs along the journey. And if you want to see Mike in person, join us for Greener Ventures in Hanover, NH on October 21, 2006. Mike will be one of our presenters, and we're delighted he can join us. Thanks, Mike!


"At the Dartmouth Entrepreneurial Network we recommend Mike Gonnerman and his book to startup entrepreneurs often. Theoretical knowledge is a good foundation, but at some point people also need the kind of practical guidance in a book like this. Very helpful for people getting into startup business for the first time."

Gregg Fairbrothers
Adjunct Professor of Business Administration, Tuck School of Business
Director, Dartmouth Entrepreneurial Network
Dartmouth College

Congratulations Mike!


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Boardroom Behavior

Do I really need a board of directors?

Should angel investors collect board fees?

Can the board ignore committee recommendations?

How do I know if my company is playing fair?

Am I just a rubber stamp?

How do I tell when an accountant is conservative?

How should our board set the CEO's pay?

What's a fair cash payment for an advisory board?

Your Friendly (?) Banker

What will make my bank happy?

What happens when a partnership goes bankrupt?

Why can't we find a banker who will stick around?

Why does my personal credit matter?

How can we clear checks faster?

Living with partners and investors

How can we get rid of an inactive partner?

Can I object to corporate donations?

What happens if we can't agree about priorities?

How can we attract small investors?

Should we discuss our cost of capital?

Should I pay commissions to a VC group?

What's wrong with royalty-based financing?

Do I have to tell investors everything?

Debt or equity?

What if we can't afford first-class legal and audit services?

How do I measure dilution?

How do investors feel about high-living managers?

The founder's perspective

What's my equity worth?

Do investors want me to put my own money at risk?

How much founders stock do I deserve?

Can I license my intangible assets to a new company?

Was I diluted or deluded?

Accountants and Other Odd Characters

How much time should it take to close my books?

What's better – a CPA or an MBA?

Are my controller's mistakes normal?

Why do I keep losing accountants?

Can I refuse non-financial assignments?

Should I promote my controller?

What can we do about an inept volunteer CFO?

Can I pay my CFO a commission?

Can we hire a cheaper audit firm?

When Money is Tight

Who gets paid first?

How do I make a nagging creditor stop calling?

Who should I save during a layoff?

Can we prevent a summer slump?

What financial disasters could wreck our business?

Who's liable for unpaid payroll taxes?

Crunching the Numbers

What's my burn rate?

How many sets of books?

How much detail should we show investors?

What's a credible way to figure ROI?

How can I calculate ROI for insurance?

Should I shoot down a bogus ROI calculation?

Can I trust amortization schedules?

How do we verify the accuracy of accounting software?

How do I figure interest rates on leases?

Payroll Perils

How should we interpret salary survey data?

How does phantom stock work?

Do I have to pay severance pay?

Should I offer a declining bonus?

Do I really owe the IRS money?

How should we accrue vacation pay?

Should we give our part-timers a raise?

Should my developers pay out-of-state taxes?

How should we set partnership salaries?

The Chain of Command

Should I respect the chain of command?

Who's my boss?

How can I safely delegate setting up a new business?

Who should sign checks?

How do I deal with a know-it-all boss?

Mike says "Relax."
"It's a piece of cake!"

"Ask Mike"

Running a company can be a lonely job. Sure, you have a management team, investors, perhaps a few friends you talk to. But when a really tough question comes up, who has to make the final judgment call?  You do!

Never mind that you're not an expert in every aspect of business management, the buck stops on your desk. You have to come up with an answer -- an answer that very often affects your company's long-term success.

Wouldn't you love to have a trusted advisor who can help answer these questions? Well, I'd like to offer you something pretty close--a new book that I've written titled Ask Mike.

Ask Mike is a collection of 136 questions about tough issues of management and finance. The questions all come from actual problems I've encountered in 30 years as an advisor to high-tech startups and small companies. The answers--which one reader describes as "no-nonsense, cut-to-the-chase, and actionable"--reflect years of experience, technical savvy, and a heavy dose of common sense.

You probably won't agree with every answer in the book. But you'll always get a straight answer. I never hide behind advice like "it depends" or "let's appoint a committee.” My goal is to help untangle the issues and point you toward a solution.

Let me tell you a little more about what you'll find in Ask Mike.

I'm a CPA and financial advisor by training, so many of the questions I encounter deal with the occasionally-confusing world of financial reports, investor relationships, and cash management. For instance, Ask Mike will give you useful answers to questions like these:

“We have huge quarter-to-quarter revenue swings that drive me crazy. My sales reps insist all the deals in their pipeline are genuine, but our sales cycle is long—an average of six months—and they say there’s no way to predict exactly when a customer will decide to sign on the dotted line. Is the situation hopeless?”

“I joined a small startup team as chief technology officer (mostly unpaid) in return for 15% of the company. Now, after six months, the company has brought in investors and new employees, who are all getting lots of new shares. I’m now left with less than 5% of the company. Shouldn’t the founders give me the percentage I was promised?”

“The collections department of our former printer has been calling just about everyone in my company about our past-due account. We really don’t have the cash to pay him right now, but his relentless nagging has been terrible for morale and I’d do almost anything to make him lay off. Your advice?”

“Over the past few years, I’ve been a board member of three companies and invested in a dozen more, all of which claim that their accounting is ‘conservative.’ Is there a simple test—a balance sheet ratio, say, or a revenue recognition method—that indicates conservative vs. aggressive accounting? Or is this just hot air?”

I've also been involved as an advisor with a good many companies that have negotiated successful merger and acquisition deals, and I have answers to a lot of questions that somehow never show up in the textbooks:

“I gave a potential buyer for my company the resumes for all of my employees—20 people altogether. I just found out he’s had several conversations with my vice president of sales. The buyer says this is a standard due diligence practice, but I’m worried that he’ll decide it’s cheaper to steal my best people. How do I protect myself?”

“I’ve been asked to leave part of the purchase price of my company in escrow, to guarantee that my receivables are collectible. That seems reasonable in theory, but how do I know if the buyer will aggressively pursue slow accounts if he can just tap the escrow any time there are difficulties?”

“Our investors just pulled the plug on our financing, leaving us with a more-or-less finished product we can’t afford to launch. We don’t have any debt on the books, but we also don’t have any revenues. I think I know people who’d pay a fair price to acquire the work we’ve done, and I’m willing to invest a few more months trying to put together a deal. However, I don’t want to waste my time if buyers are just going to offer me a dollar ‘to take the business off my hands.’ Your advice?”

You'll also find advice in Ask Mike about common problems of managing employees:

“This isn’t a big deal, but I have a couple of engineers who always get parking tickets when they visit a downtown client. They put the tickets on their expense accounts, and they’ve suggested that I bill the client for these ‘expenses.’ Would this be proper?”

“An upcoming layoff will require me to cut 25% of my accounting department’s headcount. I’m trying to figure out who to keep—people who fill the most ‘indispensable’ jobs or my most talented staff members. These are surprisingly different lists. Your advice?”

“What should I do when sales people in my company submit expense reports that are six to nine months late? This is a delicate question, because our CEO does the same thing—in fact, I just wrote him a check for more than $20,000, right after I closed the books on our fiscal year.”

Plus tips for dealing with partners and investors...

“I have a partner who no longer plays any active role in the business and doesn’t collect a paycheck. However, he does use a company credit card very freely for personal expenses. He says he doesn’t want the rest of us to buy him out—this is just a ‘dividend’ for his equity. Is there any way we can resolve this situation without a legal battle?”

“Our executive team has set up a very generous benefits plan for itself—luxury car leases, open-ended expense accounts, fancy office furniture, etc. I’m trying to put together a business plan to attract some expansion capital, and I’m worried what investors will think about our high standard of living. ‘It’s a sign of success,’ my boss says, but I’m skeptical. Your opinion?”

“I’m one of three partners who set up a company that’s become very profitable. We each put in equal working capital, and we’ve each taken the same small salary for the past three years. But now my two partners, who mostly handle sales, are lobbying for big raises based on ‘market comparables.’ That leaves me holding the short end of the stick, because I’m the inside guy who handles operations and finance stuff—which usually isn’t as highly paid as sales. What do you think is fair here?”

And difficult customers...

“I quoted a new client a $10,000 fee for redesigning their Web site, and I thought I made it clear that the price was an ‘estimate.’ The actual job came in at $14,100, based on my hourly rate. Now the client says he thought I was quoting a fixed price, and he refuses to budge on paying for the extra hours. Can he do this?”

“We have a standard contract when we sell software, but our customers routinely tinker with the terms. It’s never anything substantial, but the endless legal reviews cost us a lot of money, and it’s a huge hassle trying to keep track of special pricing, oddball deadlines, and other non-standard terms. Does everyone have this problem?”

”We have a chance to license one of our software tools to a company that will embed it in their own product. My lawyer has been great about identifying all the little points we have to negotiate about royalties, customization, support, etc. But he admits he’s not sure which issues deserve the most attention and which ones are probably unimportant. Are there two or three critical success factors you feel we should focus on?”

In all, Ask Mike covers 136 topics like these--seventeen chapters on the whole entrepreneurial lifecycle, from raising money to building a business to making a graceful exit.

If you're thinking about starting a company, read this book and you won't be caught by surprise.

If you're an angel investor, read this book and you'll become one of the smartest people on the board.

If you're a CFO, read this book and you might just become a corporate hero.

But don't just take my word for it. Listen to what entrepreneurs themselves say about Ask Mike:

“Mike Gonnerman is an understated hero to the world of entrepreneurs," says Shari Agatstein, co-founder and CEO, Skelmir LLC "He's a true expert tied into the different communities that make up the business experience from board members to executives, financiers to accountants, employees to investors.”

"A must-read for executives in new companies as well as established companies," says Tom Marmen, former CEO, RaidCore.

"Every question in the book is one that people running high-growth companies are likely to face," remarks Drew Hannah, founder & partner, Drew Partners. "Mike's answers are reasonable, refreshing and clear...with no BS or management double-speak.”

"Mike has an uncanny ability to ask the right questions and then offer insightful answers. I plan to keep this book close at hand, right next to my cash flow forecast," says Paul Baudisch, co-founder, NetMarquee Online Services.

Curious about why so many entrepreneurs love this book? It's easy to find out for yourself -- just click here to reach a secure order form for a print copy or an immediate electronic download.

And the next time a really tough question crosses your desk, reach for your copy of Ask Mike. Odds are, you'll discover an answer that helps you make a much smarter, better-informed decision.



PS: I’m so confident that you’ll enjoy (and even treasure) your copy of Ask Mike that I offer this hassle-free guarantee: If for any reason you’re not satisfied with the book, just mail your copy back to me within 30 days from receipt and I’ll promptly send you a refund for the purchase price. No questions asked.


Ask Mike

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Keep an Eye on the Cash

What's the rule for keeping a cash reserve?

How do we manage fluctuating cash balances?

How aggressive should I be with invested cash?

What should we do with a windfall?

How can I prevent repayment of company debt?

Can I pay bills of Company A with cash from Company B?

Who should take the risk on exchange rates?

Where the Money Originates

How do I know if customers are profitable?

Can a client refuse to pay a cost overrun?

Should I let a client run a tab?

What can I do about a slow-paying customer?

Can we be considered a preferred creditor?

Should we ‘lend' money to bid on a big deal?

How should we structure an OEM license?

How can we minimize contract changes?

Care & Feeding of Sales Reps

Can I recover a draw against commissions?

Is a commission override reasonable?

Is there a good incentive for selling services?

How should we handle commissions on refunds?

How about deals where customers can back out?

What's the hidden cost of extended payment terms?

Benchmarks and Metrics

How should we set up our cost categories?

How do public companies report their G&A costs?

What does a high payables ratio indicate?

What are the right metrics for services?

How should I benchmark DSO on maintenance?

How should we allocate indirect overhead sots?

Should I disclose my financials to D & B?

How can we quantify future stock option expenses?

Revenue recognition and money mysteries

When should we recognize cash revenue?

What are my intangible assets worth?

What's the value of dusty inventory?

Is a gift of equity a taxable transaction?

How do I book receivables billed in advance?

Is a ‘forgiven debt' taxable?

Gazing into the Crystal Ball: Budgets and Forecasts

Do business plan forecasts mean anything?

How do we make our forecasts less random?

How do I develop a financial forecast for investors?

When should I update our plan?

What's the right model for calculating lifetime value?

How can I shorten our budget cycle?

How can I teach employees the value of money?

How do we move from cost-per-unit budgets to revenue percentages?

How do we know if a project-based business is profitable?

Should we kill an out-of-control project?

Is it safe to sell fixed-price services contracts?

Managing Expenses

Should I pay for parking tickets?

Should we pay consultants for their travel time?

Is there a way to deal with late expense reports?

Should I pay commissions to our purchasing agents?

How can we keep our office rent under control?

How do I explain the concept of profits?

What costs can I cut without controversy?

How do I find out what insurance I really need?

What happens when a vendor's sales rep lies?

Graceful Exits

How can I optimize my company's value?

What's a zero-revenue company worth?

How do I avoid pre-sale gossip?

Do you recommend a sale of assets?

How do we value a customer list?

Will my salary dilute an acquirer's EPS?

Is it ethical to leave a company that' being sold?

Can I prevent a buyer from stealing my employees?

Can a seller solicit competing M&A bids?

How do I persuade a buyer to invest in growth?

What if my buyer is lazy about receivables?

How do we pay off missing shareholders?

Do buyers have to honor a seller's promises?