An Investment Opportunity

So, I saw my financial advisor yesterday.

I took him through the company I'm looking to buy. It wasn't the meeting I expected, as I'm pretty excited about the business. Sadly, he seemed somewhat skeptical about the acquisition.

You see, I'm getting the business on the cheap. There's been a bit of mismanagement and some shenanigans have gone on with the current owners. They don't want to sell, and this could come back to haunt me, but when you're getting a business on the cheap, there has to be some risk, right?

You see, I can get the business for 3 million pounds - which my financial advisor thinks is a pretty good price. So good, infact, he felt sure there was a catch.

But I really don't see one. The company used to be a market leader in its field - they really drove the industry for a while. But sadly that was a while back.

Still, today they're certainly in the top 20. The last report I saw had them as the 18th largest company in the industry.

My financial advisor asked me about assets, the talent in the business and investment needs. This is where he got a little concerned but I assured him that there was nothing to worry about.

The sales force is not bad. They used to be really good, but some decent salesmen left and those that remain are either not up to the job, or a little down on their luck at the moment. They've lost a few pitches recently but I'm sure things will pick up.

Still, I told him that I'd go on a bit of a recruitment drive and could probably improve the sales force if I invested another million quid into the business. I say probably, because you never know with sales guys do you? Some work out and fit in with the rest of the boys, but others don't. There's always a risk, but that's life.

I'll probably have to pay a little over the odds for talent - and some really good sales people probably won't consider us, but it'll be OK, won't it?

Everything else is fine, I assured him. Oh, apart from the factory. Our competitors have all got new hi-tech offices. Ours is a bit of a cramped shed actually. Still, I assured my financial advisor that I could build a new factory and everything would be fine. The price? Don't know exactly, but probably about 4m would cover it.

Looking slightly awkward, my finance man asked me about revenues. This is where I got really excited, hopeful that he'd finally understand the beauty of this coup. I proudly told him that turnover was just shy of a whopping 1.8 million. Profit is a bit light, sadly. I'm used to businesses making a 15% margin at least. This company is a little shy of that...well, they lost a couple of hundred thousand last year, actually.

But you know, they've had banks to pay and there's been a bit of a recession so it's only to be expected, isn't it? Manage the business properly and it'll at least break even.

I say break even, but that could be a little tough in the short-term. You see, they lost some business last year and are nolonger on a major customers list of suppliers. They're a tough client and only work with 4 suppliers at a time. The revenue loss is a bit of a hit - somewhere around 300k, but I'm not too worried.

My advisor seemed more worried than me. "So", he said, "the company's lossed would be 300k more this year without this customer. So, net loss is more like half a million quid". His maths seemed about right.

He then talked financial speak at me and asked about revenue conversion, EBIT and stuff. I didn't really get it so I asked him to put it into English.

"So, you're buying this somewhat outdated company that has an inferior product and it's probably a bit past its prime?"

I told him that was a bit harsh and assured him that the trick here is to make it great again - you know, a top 3 or 4 player in the market.

"Ah yes", he said. "You covered that. To get close to market leadership, you need to spend a little money on top of the 3m purchase price. There's another million on talent and 4 million for the new factory. So, your actual cost is something like 8 million, maybe more - on a business that, with the loss of this major client, is losing half a million a year".

He still didn't get it. I told him that, if we build the factory, we'd probably increase prouction (assuming that our product was good enough so people wanted to buy it). If we invested in more talent, we'd hopefully get the big customer back.

"Best case scenario?" he asked.

"Easy", I said. "Break even"

He summed it up by saying that if I bought the company and if I bought a better salesforce and if I bought the new factory and if the competition stayed still and didn't improve and that if this all happened and if I got that big client back, then I might, just might, break even.

"Exactly!!!", I said excitedly. The dumb advisor finally get's it, I thought.

Funnily enough, he told me not to buy the business.

But what does he know?

The Heat is Off!!!

Finally. Let me explain.

Last October, as it was getting a little chilly, I tried to turn the heat on in my apartment. Absolutely no joy. So I asked my assistant to contact my landlord and ask him how to turn the system on.

“Oh”, she said “they haven’t turned the heat on yet”. By this, she meant ‘the government’.

Only after 5 consecutive days below something like 4° does someone flick what must be an almighty switch, and homes all over Russia get heat; perhaps the most overt legacy of previous times I've come across in my time here.

And they did flick the switch a couple of days later. Since then, my apartment has been so warm that on most evenings, I’ve either had a window open, or get the air-conditioning running!!!

-20° outside, and it’s been positively toasty indoors - I've spent the coldest winter I've ever experienced in shorts and a T-Shirt most evenings. The cost and impact on the environment of all this heating and cooling doesn’t bear thinking about (if there’s one thing we have in abundance in Russia, it’s energy).

But, I woke this morning to another beautiful sunny day, temperatures in the low 20’s and NO HEATING. They’ve pulled the plug and won’t be inserting it again until October.

It’ll probably snow next week, and we’ll all be buggered.

Why do today if you can put it off....

Update on my last post. Client called to tell me the decision will now happen on Monday.

Great. More anxious waiting. I'm off for a bottle or two

A watched pot never boils

No picture today, just frustration...

On Tuesday, we pitched the largest piece of business that will come up in Russia this year.

We were great. Honestly, the idea we put on the table was just fantastic. I set up the meeting by telling the 12 (!) members of the pitch committee that we didn't expect them to buy anything, but that they should be excited by our creative thinking.

I think they were. Given that we were the fifth of six agencies to pitch, at least we were at the very least, light relief. At least I left thinking we had done the best we could do and now it's up to them to decide.

And I was told that they want to make the decision today. So, I was woken up by a text from the client asking me to call. Caffeine and adrenaline pumping, I made the call. He wanted.... more clarification about our proposal and the team structure. And no clues from him beyond that.

That was 4 hours ago...

Still no word. If pitching is the high in the ad business, the waiting is awful. I feel sick to my stomach - it's like being a teenager waiting for that pretty girl to call you because she said she would. Damn her...I didn't fancy her much anyway.

But this is worse. If we lose, I'll be heartbroken. But I'll also tell myself that it isn't the end of the world. BUT, if we win, it radically changes our business for the better. And in the current crisis, it's a huge opportunity.

This isn't like your team needing a goal or a try in the last few minutes of a game. In the immortal words of Bill Shankly, Liverpool FC manager; "It's not a matter of life and death. It's more important than that."

I'll let you know...

“It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt”.

Mark Twain was, I fear, right.

I’ve wanted to start a blog for a few years, and now have my chance. I’ll give my thoughts on a lot of things: the business of advertising and marketing communications in general, specific campaigns from both our clients and others, my thoughts on what’s happening in our world of economic meltdown and new economies rising.

I’ll write about my thoughts on living and working in Russia; its culture, its quirks and its beauty.

And I’ll write about my family; my wonderful wife and beautiful children.

I’ll muse about sport in general and Chelsea FC in particular. I’ve been a fan for over 30 years, and there is a lovely symmetry that the Blues and I are now both so linked with modern Russia.

I’ll post and post. But will anybody be interested?

Having wanted to do a blog for so long, the fear is I suppose twofold: will anybody actually read it and will I have anything interesting to say. Time will tell.

The truth is, a blog is just a digital diary. And diaries are implicitly personal things, right?

So, forgive me, but I think the best thing to do is to write for myself. And if anyone is interested in what I have to say, then so much the better.

If not, Twain will be proved right. He was a sarcastic old bugger, but truth be told, he made a lot of sense.