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The 59� Yellow File Folder

Excerpt from Chapter 11 in the book "Presenting to Big Shots"

Kathleen L. O'Neal
Right On The Money!
Tel: (321) 624-5974
Email: Email Ms. O'Neal

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A Special Situation Calls for Creativity

I'm going to share with you another true story. I'm not recommending this method unless you have solid verbal skill sets and you find yourself in circumstances similar to these.

The proposal was for a high dollar investment in software to increase the efficiency of existing machinery, and the effectiveness of front-line people who used the machinery. This was in a customer service area with flat Revenue projections for the foreseeable future. That wasn't going to change.

The engineer and I had to present to the new BigShot. Mr. New BigShot had just come to the organization a few days earlier. He was spending his first four days on the job listening to his eight Vice Presidents go over their current and proposed engineering projects. Each Vice President got only a half-day to say what s/he wanted to say.

The engineer and I were scheduled for a meeting separately from our VP's because our project was so large and complex. We were given the last time slot of 45 minutes at the tail-end of the four days. The engineer figured we had been negatively placed there because some of the executives were confused as to why the company should even consider making a high-dollar investment in a service area with flat Revenue projections. Anyhow, all the VPs wanted to get their pitches in before ours.

My Challenge

The engineer gave me a challenge. Because we knew that Mr. New BigShot was to have four full days of nothing but slides, charts, and handouts, I was challenged by the engineer to come up with a financial presentation that didn't use anything like that.

"What, are you nuts?" I said. "How am I to do a financial presentation for this project proposal without slides, charts, or handouts?" "I don't know," was the engineer's reply, "but I really think we'll do better if we just walk into this new guy's office and focus on using strong verbal skill sets."

Well, I couldn't argue with that logic. A verbal focus was likely best, given the circumstances. But what could I do to grab BigShot's attention, and convince him of the merit of the investment? It was already Tuesday afternoon, and we were scheduled to present that Thursday at 5 pm.

The 59� Yellow File Folder

I thought and thought. I was at home on Wednesday evening when I spied a couple of yellow file folders I had recently bought for another use. They were nice and bright, and had only cost 59� each. My gentle teaching methods kicked in. What if I cut strips from one of the file folders to represent the annual total Revenue streams, then tore away the various Expenses to leave the Profit? It would be a classic high-level case of the old, simplistic formula:

Profit = Revenue - Expense (You do remember this, yes?)

So, that's exactly what I did. We were presenting three different options, including the first one of "do nothing differently." The second one required the investment in the first two years, and the third option showed what would happened if the investment was made all in the first year.

Because we were dealing with software expense, the investment really wasn't that big compared to the efficiency gains (and hence expense reductions) of the total financials for the area.

We two walked into New BigShot's office right at 5 pm on Thursday. He looked tired. He was surprised we hadn't brought an overhead projector and screen with us. The engineer explained to Mr. New BigShot we just wanted to talk directly to him without any AV aids. Mr. New BigShot brightened up, and invited us to sit around a small coffee table in comfortable chairs.

The engineer spoke first, and talked for 20 minutes. So well prepared, the engineer required nothing more than an occasional glance at a single sheet of handwritten notes. Then, it was my turn for the financials. "You've probably heard," I began, "that this service area has flat Revenue for the foreseeable future." New BigShot nodded his head.

"And you're probably wondering why the company should invest millions of dollars in software development for an area with flat Revenue," I continued.

"Yes, I was indeed wondering about that," he answered. The engineer had been right-executives had been talking negatively to Mr. New BigShot about our proposal before we even got there!

"I'm going to show you why," I said confidently. With that, I placed a row of 10 identical strips, each cut from that 59� yellow file folder, directly in front of him on the coffee table. "This," I explained, "depicts the flat Revenue dollar level for each of the next 10 years."

Shows the flat Revenue dollars projected for the next 10 years.

I remember that he had a dark wooden coffee table, and the bright yellow strips showed up really well. Do you think I grabbed his initial attention using this method to begin a financial presentation? You betcha!

The Beginning of "Do Nothing Differently"

Next, I picked up the first strip, and tore it precisely at a point I had marked in pencil on the back of the strip. "This top piece," I remarked, "is the amount of the Revenue dollars that currently has to be used to pay the Labor expense for this area." I placed both torn pieces back down where the whole strip used to be. The remaining nine strips were then torn in the same manner. The result looked like this:

Top section represents the amount of the total Revenue dollars used to pay for the Labor expense.

Next, I picked up the lower section of the first strip. Again, I tore it at a point I had marked on the back. Returning those pieces back down into place, the first year was now divided into three pieces. "This middle section," I said, "represents the amount of all the other Expense utilized in this operation." Tearing the other nine strips in a similar manner, I concluded, "You can see that there is a small amount of Profit left each year, after taking out all the Labor Expense and Other Expenses from the Revenue."

Pointing to the bottom row of pieces, I said, "If we Do Nothing Differently, the amount of Profit we will have is shown by the bottom section. Not bad, but not stellar." Mr. New BigShot agreed.

The Development of a Second Course of Action

At this point, I laid out a fresh line of 10 full strips, again representing the flat Revenue dollars projected for the next 10 years. Picking up the first strip, I again tore off and referenced the amount of Revenue dollars that would have to be used to pay for the Labor expense. The bottom piece was again torn to show the amount of Revenue dollars used for all the usual Other expenses.

The remaining stub for Profit, however, was torn in half for that first year. Why? Because that was the amount of the usual Profit that could instead be put into developing software for a New Course of Action. We called it a Second Course of Action Alternative to the first Do Nothing Differently.

The second year of Second Course of Action Alternative showed two interesting things. First, another investment amount, similar to the investment amount in the first year, would be needed to finish up the software development. Secondly, the software developed in the first year would start to have the desired impact of reducing the Labor expenses in the second year. After the software was fully developed at the end of the second year, the full desired impact of the Labor expense reduction would quickly become notable. As the need for Labor expense goes down, guess what happens to the Profit level?

Hey, not a bad increase in Profit � even for an area with flat Revenue!

The Development of a Third Course of Action

For the Third Course of Action Alternative, we showed what would happen if the company was willing to take all the Profit in Year 1, and put it towards the software development in that timeframe. That meant that the reduction in Labor expense would be realized even sooner. What do you suppose that would do to the overall amount of Profit?

Though a bit hard to see here, the total Profit from the Third Course of Action Alternative is the highest-about 5 % higher than the Second Alternative.

Either new course of action would result in more than doubling the amount of Profit in that area. Do you think New BigShot was interested?

Do you think New BigShot now gave a flip about whether the Revenues were flat? Heck, no! Do you think New BigShot cared why the software would cost so much to develop? Nope.

Mr. New BigShot was a smart man-he knew the real name of the game is Profit. He was easily able to complete the puzzle-just like you did, didn't you?

Which of the three courses of action do you think Mr. New BigShot picked? I'll never forget it. He simply pointed to the bottom section of the Third Course of Action Alternative, and said, "I want that!"

The engineer and I nonchalantly responded, "Okay, we'll get started on that Third Course of Action." We left his office elated and walked back to our respective desks. The entire presentation for this multi-million dollar proposal had taken just 40 minutes.

My Boss' Reaction

By the time I got back to my desk, it was 5:45 pm. I started packing up my things to go home. Then, I got a call from my boss, Phil.

"What exactly did you do in the proposal presentation to Mr. New BigShot?" he asked. Phil had already seen my presentation before with the charts & graphs, and had naturally assumed I would use those same tools. I hadn't wanted to scare Phil with the engineer's off-the-wall plan for no AV aids�Phil could get a little too uptight at times, even though he was overall a pretty good boss.

Hmmm, Phil sounded a little tense. Gee, I thought the presentation had gone pretty well. "Why do you ask?" I queried.

My boss explained, "Because Mr. New BigShot just called up here and said he learned more from you and the engineer in 40 minutes than he'd learned in the past four days from all of his eight VPs combined. So I'm begging you to tell me�just what exactly did you do?" "Well, Phil," I said, "it all started with a 59� yellow file folder�"

Kathleen L. O'Neal's professional career includes working at AT&T for 20 years, rising to the position of Financial Director, a senior management position in that Fortune 500 Company. Since 2001 she has worked with emerging, high-growth start-up companies in the capacity as CFO with responsibilities for financial planning, budgets and projections, accounting systems and software selection, set-up and implementation.

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