minia
BUSINESS / PRO-FORMAS
This morning while I was getting ready for the day I started to think about Falcon Manufacturing Co. (The name, Falcon, hides the real name.) I had no reason to start thinking about it but quite often, during the early morning hours, my mind unexpectedly plays movies of long ago forgotten events.
The event that played out this morning is an important one and the feelings were very strong. I think that this event is one that some of my posterity might find valuable. I know that not every one will find it interesting but some will indeed find it interesting and worthy of adding it to their knowledge base and in the process learn something about Grandpa Ralph G. Brown son of Ralph E Brown and Julia Sevey Brown.
Before I start telling this interesting story let me reveal my feelings about building a business plan for that business that you are planning to start.
First of all I believe that a proforma is a very important part of a business plan. In building a proforma you must be absolutely honest with your self and the loan officer. In order to develop a good proforma a great deal of research time must be invested. Much of the detailed information discovered will end up in a layer of accounting called “cost accounting “. The proforma is a prophesy and should reflect the same information and format that will be used in the accounting system. It is expected to tell the truth and to be a reliable guide.
Some accountants do not like cost accounting or proformas and treat them as unimportant. I like cost accounting and creating pro-formas. It makes the business come alive as it paints a picture, cell by cell. In the end it requires Research, Research, Research.
Before telling about Falcon Manufacturing Co, I want to write about an experience which I had that strengthened my credentials and qualifications to bring to life a brand new hollow metal company.
First what is Hollow Metal? The next time that you are in a hospital or school look at the window frames, the metal doors and door frames. You are looking at hollow metal products. They represent a large part of the total cost of a building. See the picture insert of a hollow metal frame. It occupies one entire wall and has four window openings over four panels and one door frame all in one unit.
During the year of 1969 I was accepted for employment by Stiles, Allen and Rimer which was the hokding company for a sheet metal co., a roofing co. and two hollow metal companies. They were Stiles Sheet Metal Co., Allen Roofing Co., Hol-O-Met in Mesa and Midland Steel in Oklahoma City. They were all headquartered on South Robson St. in Mesa, Arizona. Dee Stiles oversaw the sheet metal and the two hollow metal factories and Granvel Allen oversaw the roofing company. Mr Rimer was the secretary, controller and accountant. He had just passed away and I took his place. I was 41 years and qualified to take over as controller.
I brought the company into the computer age and installed a new way to track work in progress, finished goods and accurately evaluate inventory. Bill Gates the PC and Windows were unknown. We did, however, have available new computer technologies using system programs such as Fortran, IBM DOS, Basic, etc.
I worked for two years under Stiles, Allen and Rimer then assisted Dee and Granvel in selling their business’ to Chesapeake Industries. Ralph Johnson, CEO of Chesapeake Industries and his accountant sat across the table from us as we entered into negotiations to sell the company to Chesapeake Industries. It’s stock was publicly traded over the counter (OTC) and our stock was privately held. We sat across the table from each other and talked things over for two or three days until we struck a deal.
Mr. Johnson was on a roll. He wanted to buy another hollow metal company, Atlas Universal, in San Francisco. I was now working for Chesapeake Industries and sat with Mr. Johnson on his side of the table.
After several hours of negotiations we struck a deal. Mr. Johnson in the meantime had come to rely on my performance and ended up putting me in charge of all three hollow metal factories that were now his. He gave me the title of vice president over Chesapeake Industries hollow metal division. We kept the accountant in San Francisco, and hired an accountant for the Mesa and Oklahoma City factories.
I set up a standard general accounting system and cost accounting system for all three factories and helped the San Francisco and Mesa accountants to set up computer accounting programs. We had engineers in all three factories who took off data from blue prints for selected jobs and calculated bid amounts. All to gether there were about 12 engineers. They represented a fairly big payroll expense. By using commercial computer servers in St Louis and with the expertise of the programmers there we developed a proprietary system that fed “take offs” and computerized bids to all three factories. We were able to reduce the original twelve engineers down to about seven.
Three years later the managers and accountants for two wood door factories and an auto parts factory from back East (all owned by Chesapeake Industries) and I found our selves in down town San Francisco seated around a table at the top of the Fairmont hotel in a very suave restaurant. We had gathered there to go to Chico, California, North of Sacramento, as an auditing team, to take inventory and evaluate a large wood door factory to decide rather or not we wanted Chesapeake Industries to buy it. We decided that it was not a good buy.
I was seated next to Ralph Johnson and he ask me if I would bring my family to live in San Francisco to help move Chesapeake Industries headquarters from Silver Spring, Maryland to San Francisco and take over it’s management. Needless to say his offer was a shock and I felt greatly honored by it.
I was immediately saddened though because I knew that I could not accept his offer. During the seventies the hippie and gay movement were every where in San Francisco and I strongly felt that I could not subject my family to that environment. Mr. Johnson even offered to pay for a three bedroom penthouse that could be seen, from where we were seated, as part of my compensation.
As I told him how much that I appreciated his offer and gave him the reason why I could not accept it I knew that my employment with Chesapeake Industries would be ended. In a few weeks it was so as George Leakie, Ralph’s Son In Law, took my place. I understood that Ralph’s daughter was elated over the move. She had wanted to live in Phoenix for a long time.
What does all of this have to do with the title BUSINESS / PRO FORMAS ?
It gives some insight on where I spent my time, what I did for a living and how I got into starting a new hollow metal business. Granvel Allen gave me a call one afternoon not too long after I was let go from Chesapeake industries. He told me that he had also been terminated from Chesapeake Industries and
wanted to know if I would be interested in working with him to start up a new hollow metal business. He had a good nest egg available from the stock that he held in Chesapeake Industries and was willing to match whatever I could invest. I was able to put in $10,000.00 but $20,000.00 wasn’t anywhere close to what would be needed but was I interested in working with him? I’ll say!
We both belonged to the Rotary Club and had friends that might be interested in getting in on the ground floor of a business venture that had a good chance of succeeding.
Granvel also belonged to the Arizona Club and had a good track record for bringing in business.
I agreed to put to-gether a pro-forma and business plan in exchange for a deferred compensation if the company turned out to be successful.
I had saved volumes of hard data that I could use to build a proforma and business plan. I had most of the information already stored in my mind but hard data is needed in order to win investors. I went to the Dodge Plan Service and the Arizona Contractors Plan Service to determine what we could expect for the demand of our product.
I determined how much capital we would need in order to secure a building, purchase manufacturing equipment, to get started and to finance the expected accounts receivable. I determined who our suppliers would probably be and what we could expect for accounts payable. We already had a commitment for a building in exchange for common stock and also a commitment to furnish and install a heavy duty electrical service likewise in exchange for stock..
All together we ended up with 6 investors and had raised enough capital. The list of investors read like “who’s who” in Mesa. It took close to a year to increase the size of the building and get ready for production. We had hired two engineers and put them under Granvel. They were able to build up a nice backlog of orders so it looked like we were ready to go.
I failed to tell you that before we brought each investor on board I gave each one a copy of the of the pro-forma and business plan. Assuming that there would not be a down turn in the economy it would take two years to break even and another six months to be in a comfortable profit position. Every one was OK with that.
NOW GIVE ME YOUR ATTENTION!
When things begin to go wrong at the board of directors level then all of the good planning in the world will probably not save the company. We operated for a year and the business was on target with the proforma but all at once we started having trouble with the bank which had agreed to give us a continuing accounts receivable operating loan. What was wrong?
As it turned out one of the investor’s had a wife who was on the bank’s board of directors. I believe that he talked to her about events of the day and inadvertently prejudiced her attitude about how our investors were getting along. Actually there were a couple of the investors having problems with issues between them selves and not related to our company but it made her nervous. Banks do not like dissention in the ranks!
Granvel and I tried to find another bank that could help us but it seems that the brotherhood cares for it’s own. Nevertheless we didn’t give up searching. The problem had a domino effect. One of the other investors, a prominent lawyer in Mesa, wanted to close the business so that he could use his share of the loss for a tax advantage. He said that he needed all of the losses that he could find. This caused a couple of the other investors to get cold feet. One thing led to another until we had to close down.
I could have been hurt much worse but I had a back up skill in place and soon I was able to continue bringing in an income.
What are some of the lessons learned from all of the above? It wasn’t because I did not deliver a truthful proforma. It had nothing to do with operations or management. It was because like one or two rotten apples thrown into a bucket of good ones it causes the entire bunch to spoil. The problem is that by the time the defect surfaces it is too late to correct it. This all means to me that there might be times when you have done everything right it may still be damaged or destroyed by others. But don’t waste time fretting about it. There isn’t time for that
By the way, a second skill might come in handy..
Perhaps what I have written here will give future generations of the family an opportunity to learn a little bit of history about one of their progenitors and from a record made by his own hand.
Love, Grandpa Ralph G Brown
BUSINESS / PRO-FORMAS
This morning while I was getting ready for the day I started to think about Falcon Manufacturing Co. (The name, Falcon, hides the real name.) I had no reason to start thinking about it but quite often, during the early morning hours, my mind unexpectedly plays movies of long ago forgotten events.
The event that played out this morning is an important one and the feelings were very strong. I think that this event is one that some of my posterity might find valuable. I know that not every one will find it interesting but some will indeed find it interesting and worthy of adding it to their knowledge base and in the process learn something about Grandpa Ralph G. Brown son of Ralph E Brown and Julia Sevey Brown.
Before I start telling this interesting story let me reveal my feelings about building a business plan for that business that you are planning to start.
First of all I believe that a proforma is a very important part of a business plan. In building a proforma you must be absolutely honest with your self and the loan officer. In order to develop a good proforma a great deal of research time must be invested. Much of the detailed information discovered will end up in a layer of accounting called “cost accounting “. The proforma is a prophesy and should reflect the same information and format that will be used in the accounting system. It is expected to tell the truth and to be a reliable guide.
Some accountants do not like cost accounting or proformas and treat them as unimportant. I like cost accounting and creating pro-formas. It makes the business come alive as it paints a picture, cell by cell. In the end it requires Research, Research, Research.
Before telling about Falcon Manufacturing Co, I want to write about an experience which I had that strengthened my credentials and qualifications to bring to life a brand new hollow metal company.
First what is Hollow Metal? The next time that you are in a hospital or school look at the window frames, the metal doors and door frames. You are looking at hollow metal products. They represent a large part of the total cost of a building. See the picture insert of a hollow metal frame. It occupies one entire wall and has four window openings over four panels and one door frame all in one unit.
During the year of 1969 I was accepted for employment by Stiles, Allen and Rimer which was the hokding company for a sheet metal co., a roofing co. and two hollow metal companies. They were Stiles Sheet Metal Co., Allen Roofing Co., Hol-O-Met in Mesa and Midland Steel in Oklahoma City. They were all headquartered on South Robson St. in Mesa, Arizona. Dee Stiles oversaw the sheet metal and the two hollow metal factories and Granvel Allen oversaw the roofing company. Mr Rimer was the secretary, controller and accountant. He had just passed away and I took his place. I was 41 years and qualified to take over as controller.
I brought the company into the computer age and installed a new way to track work in progress, finished goods and accurately evaluate inventory. Bill Gates the PC and Windows were unknown. We did, however, have available new computer technologies using system programs such as Fortran, IBM DOS, Basic, etc.
I worked for two years under Stiles, Allen and Rimer then assisted Dee and Granvel in selling their business’ to Chesapeake Industries. Ralph Johnson, CEO of Chesapeake Industries and his accountant sat across the table from us as we entered into negotiations to sell the company to Chesapeake Industries. It’s stock was publicly traded over the counter (OTC) and our stock was privately held. We sat across the table from each other and talked things over for two or three days until we struck a deal.
Mr. Johnson was on a roll. He wanted to buy another hollow metal company, Atlas Universal, in San Francisco. I was now working for Chesapeake Industries and sat with Mr. Johnson on his side of the table.
After several hours of negotiations we struck a deal. Mr. Johnson in the meantime had come to rely on my performance and ended up putting me in charge of all three hollow metal factories that were now his. He gave me the title of vice president over Chesapeake Industries hollow metal division. We kept the accountant in San Francisco, and hired an accountant for the Mesa and Oklahoma City factories.
I set up a standard general accounting system and cost accounting system for all three factories and helped the San Francisco and Mesa accountants to set up computer accounting programs. We had engineers in all three factories who took off data from blue prints for selected jobs and calculated bid amounts. All to gether there were about 12 engineers. They represented a fairly big payroll expense. By using commercial computer servers in St Louis and with the expertise of the programmers there we developed a proprietary system that fed “take offs” and computerized bids to all three factories. We were able to reduce the original twelve engineers down to about seven.
Three years later the managers and accountants for two wood door factories and an auto parts factory from back East (all owned by Chesapeake Industries) and I found our selves in down town San Francisco seated around a table at the top of the Fairmont hotel in a very suave restaurant. We had gathered there to go to Chico, California, North of Sacramento, as an auditing team, to take inventory and evaluate a large wood door factory to decide rather or not we wanted Chesapeake Industries to buy it. We decided that it was not a good buy.
I was seated next to Ralph Johnson and he ask me if I would bring my family to live in San Francisco to help move Chesapeake Industries headquarters from Silver Spring, Maryland to San Francisco and take over it’s management. Needless to say his offer was a shock and I felt greatly honored by it.
I was immediately saddened though because I knew that I could not accept his offer. During the seventies the hippie and gay movement were every where in San Francisco and I strongly felt that I could not subject my family to that environment. Mr. Johnson even offered to pay for a three bedroom penthouse that could be seen, from where we were seated, as part of my compensation.
As I told him how much that I appreciated his offer and gave him the reason why I could not accept it I knew that my employment with Chesapeake Industries would be ended. In a few weeks it was so as George Leakie, Ralph’s Son In Law, took my place. I understood that Ralph’s daughter was elated over the move. She had wanted to live in Phoenix for a long time.
What does all of this have to do with the title BUSINESS / PRO FORMAS ?
It gives some insight on where I spent my time, what I did for a living and how I got into starting a new hollow metal business. Granvel Allen gave me a call one afternoon not too long after I was let go from Chesapeake industries. He told me that he had also been terminated from Chesapeake Industries and
wanted to know if I would be interested in working with him to start up a new hollow metal business. He had a good nest egg available from the stock that he held in Chesapeake Industries and was willing to match whatever I could invest. I was able to put in $10,000.00 but $20,000.00 wasn’t anywhere close to what would be needed but was I interested in working with him? I’ll say!
We both belonged to the Rotary Club and had friends that might be interested in getting in on the ground floor of a business venture that had a good chance of succeeding.
Granvel also belonged to the Arizona Club and had a good track record for bringing in business.
I agreed to put to-gether a pro-forma and business plan in exchange for a deferred compensation if the company turned out to be successful.
I had saved volumes of hard data that I could use to build a proforma and business plan. I had most of the information already stored in my mind but hard data is needed in order to win investors. I went to the Dodge Plan Service and the Arizona Contractors Plan Service to determine what we could expect for the demand of our product.
I determined how much capital we would need in order to secure a building, purchase manufacturing equipment, to get started and to finance the expected accounts receivable. I determined who our suppliers would probably be and what we could expect for accounts payable. We already had a commitment for a building in exchange for common stock and also a commitment to furnish and install a heavy duty electrical service likewise in exchange for stock..
All together we ended up with 6 investors and had raised enough capital. The list of investors read like “who’s who” in Mesa. It took close to a year to increase the size of the building and get ready for production. We had hired two engineers and put them under Granvel. They were able to build up a nice backlog of orders so it looked like we were ready to go.
I failed to tell you that before we brought each investor on board I gave each one a copy of the of the pro-forma and business plan. Assuming that there would not be a down turn in the economy it would take two years to break even and another six months to be in a comfortable profit position. Every one was OK with that.
NOW GIVE ME YOUR ATTENTION!
When things begin to go wrong at the board of directors level then all of the good planning in the world will probably not save the company. We operated for a year and the business was on target with the proforma but all at once we started having trouble with the bank which had agreed to give us a continuing accounts receivable operating loan. What was wrong?
As it turned out one of the investor’s had a wife who was on the bank’s board of directors. I believe that he talked to her about events of the day and inadvertently prejudiced her attitude about how our investors were getting along. Actually there were a couple of the investors having problems with issues between them selves and not related to our company but it made her nervous. Banks do not like dissention in the ranks!
Granvel and I tried to find another bank that could help us but it seems that the brotherhood cares for it’s own. Nevertheless we didn’t give up searching. The problem had a domino effect. One of the other investors, a prominent lawyer in Mesa, wanted to close the business so that he could use his share of the loss for a tax advantage. He said that he needed all of the losses that he could find. This caused a couple of the other investors to get cold feet. One thing led to another until we had to close down.
I could have been hurt much worse but I had a back up skill in place and soon I was able to continue bringing in an income.
What are some of the lessons learned from all of the above? It wasn’t because I did not deliver a truthful proforma. It had nothing to do with operations or management. It was because like one or two rotten apples thrown into a bucket of good ones it causes the entire bunch to spoil. The problem is that by the time the defect surfaces it is too late to correct it. This all means to me that there might be times when you have done everything right it may still be damaged or destroyed by others. But don’t waste time fretting about it. There isn’t time for that
By the way, a second skill might come in handy..
Perhaps what I have written here will give future generations of the family an opportunity to learn a little bit of history about one of their progenitors and from a record made by his own hand.
Love, Grandpa Ralph G Brown
Pictures clock wise:
Pequenya now 2 yrs old
Garden & orange tree/ garden is 6 weeks old & orange tree is five months old
Chulie now 4 years old
Hollow metal frame/ see article
Submitted June 6, 2009 by Ralph G Brown
