I’m heading back to the reality of a Utah winter after a week in the Florida sun. I just finished training in Cape Coral, Florida doing my owner earnings training with my friends at MacDermid Platform Technologies Company. This class is a full week with finance training and intensive case study work. It’s a course for executives and can play out a bit like a finance boot camp. MacDermid uses this class to bring their high potential managers up to speed financially and for integration of executive teams from acquisitions.
This class had senior executives from some recent acquisitions. The overall class got an average score on our financial assessment of 74%. This is the highest score we have seen! The national average is 38% and the highest score before this group was in the high 60 percent area from our GE MDC (Management Development Course) we did for years at GE Crotonville. On the other hand the low score was 24%. One of their challenges is to get the whole group up to speed while not boring the experts. This class went great, the experts in the room learned how to explain difficult financial concepts as I teach. This group was great, they had the right attitude and added a great deal to the discussion.
In this class we focus on cash flow and the approach concept of Warren Buffett’s owner earnings metric which is what Wall Street and analysts call free cash flow. Most managers know the income statement well and a little bit about the balance sheet but they don’t know as much about cash flow. The funny thing is without cash a business dies so it makes sense to understand that. Nothing happens in a business until you hire good people and pay them with cash.
Our case study covers the value of cash flow as the business faces challenges in the case. They learn what can happen when a business runs out of cash. The case study includes challenges like additional shares being issued to raise cash, which dilutes and upsets board members. I play a member of the board with other MacDermid executives. Another challenge is to take on very high interest debt that puts a significant strain on the future of the business. When you work with these financial models in the case one quickly realizes that cash is affected by a lot more than just profit. Things like inventory, capital investment, and accounts receivables also can significantly affect cash. Through the case studies the attendees see how much they affect the business.
Of course in the class I do my finance basics on the statements, ROI, and what it means to be a public company. The nice thing about this class is we learn the concepts during the day and then the students apply them in the case study. While the week was what I call firehose finance it certainly prepares these business leaders financially.
This was my 11th course with MacDermid over about 14 years. During that time I have seen MacDermid go from a NYSE company to a private equity company and then to an acquisition by Platform Technologies where they are back on the NYSE. During all of these changes the financial fundamentals of Warren Buffett’s owner earnings have never changed.