It was finance on Valentine’s Day this year. What great day to share my devoted love to finance with a senior sales team at LinkedIn. This is the fifth session I have done for LinkedIn sales group and the sixth one overall. This session was very much like the others. Good questions and a lot of great application in these sessions.
My job is to provide basic financial concepts and then to let the attendees apply the concepts they learn to their accounts, most of which are large public companies. The idea, as I have said before, is to understand a business financially so you can be a more informed LinkedIn sales rep. With some basic understanding of the client’s financial situation the sales rep can become more of a consultant rather than someone selling a product. Since LinkedIn has rolled out this program there has been a lot of success in connecting with their clients on a deeper level. They also find that there can move higher up in the organization and expand their base.
In this class, we had several insurance and banking businesses. These businesses look at different financial metrics than most businesses. Instead of things like operating and gross profit margins and return on total capital, we look at things like efficiency or expense ratios, return on equity and capital ratios. It really is a different animal and some of these reps need to understand both types of businesses since they have clients in several industries. A good sales partner in this strategy needs to be a good financial analyst on a basic level. Listening to a clients’ quarterly call and press releases are really important to be able meet their needs.
In this class like many others we learned about the new exciting metric free cash flow. This number is all the rage with public companies. It’s calculated by taking operating cash flow directly from the cash flow statement and deducting from that the net amount of money spent on new capital taken from the investing section of the cash flow statement. This capital investment can be in physical products or in intangible investments. One company I work with, NBCUniversal, spends significant cash on new content to sustain their business which should also be used as a deduction to operating cash flow to get to free cash flow.
This free cash flow number is really a measure of the business’ discretionary cash available to the business. Operating cash is simply the cash generated or lost by collecting on the business’ sales or service and paying for the costs associated with that service and deducting from that the amount of new investments required to sustain the business. Free cash flow represents the cash that is ‘free’ and available to be used by the owners of the business. If a business has free cash flow they can do things like pay down their debt, pay dividends or buy back stock, use the free cash to make acquisitions, or just sit on that extra cash in the form of investments (look at Apple’s balance sheet).
So being in New York on Valentine’s Day was great. Being alone after training not so much. I did score some great Chicken Parmesan at Trattoria Trecolori on 47th street. I highly recommend it. I’m sitting in the sky club for Delta now and then it’s home again. Maybe a ski day tomorrow if the weather cooperates.