To The Readers Of The Metropolitan Corporate Counsel :
On September 21, 2007, the ACC San Francisco Bay Area Chapter put on its second annual "Mini-MBA Day: Financial Literacy for In-House Counsel." The 291 Chapter members who attended had the opportunity to learn the basics of accounting and financial reporting from other chapter members and an accounting professor. Big-Four valuation consultants taught the basics of finance and discounted-cash-flow analysis. Attendees then applied the accounting/finance basics to business issues. Investment bankers led attendees through valuation of a company over its lifetime, from angel funding, to VC financing, through M&A and to an IPO.Finally, attendees learned about the capitalization and debt structure of companies.
You, the MCC reader, may be wondering why 291 people took the time for a financial "spa day" to learn about these topics. Whether you aspire to enter a business role or to find more happiness in your legal role, most of you are probably in need of an Extreme Business Makeover .
Grooming Yourself For Financial Literacy
The first stop for most in-house counsel should be a finance spa day like our local ACC Chapter's program. Other chapters and ACC National have similar programs. Also, you can find these "spa weekends" in the executive education programs of local business schools, as well as through CLE providers. A 90-minute program is a good start, but will not give you the full-body treatment you need. At the very least, a program should cover: (a) the assembly and interrelationships of the balance sheet, income statement (P&L) and statement of cash flows; (b) the mechanics of a net-present-value calculation (including calculation of the discount rate); (c) the preparation of a basic discounted cash flow (DCF) to value a transaction or project; and (d) the identification and calculation of key profitability and liquidity ratios. A superior alternative to the two-to three-day class is a basic accounting and basic finance course in a part-time MBA program, which may be covered under your company's education reimbursement program.
Feeding Financial Famine
If you are like most in-house lawyers, your financial skills are starving because you are not properly feeding them. Your daily nutrition should consist of one serving of The Wall Street Journal and one serving of your local newspaper's business section. Add a dash of your industry's principal trade journal for enhanced flavor. Note that proper nutrition demands that you take the WSJ in moderation for the first few months to develop the ocular tolerance to read tiny numbers and view impressionist-dot-matrix headshots without developing a headache. To start, look for mentions of your company, your competitors, and your customers in the index of companies.
Finance Culture And Communication
You will have learned the language of finance at your "spa weekend." You will have practiced your finance with your daily WSJ reading. But language is only one aspect of culture. You need to adopt the local custom, and by that, I mean that you need to learn Excel or some other spreadsheet program. Use the customs of finance when communicating with financial clients. As in-house counsel, you balance risk and reward in qualitative terms. The Capital Asset Pricing Model (you'll learn that in your spa weekend) quantifies risk and reward. Demonstrate your fluency by applying your quantitative skills to qualitative legal assessments. You will impress your clients and give much more robust advice.
Jeremy Kashian, President
Phil Strauss, PR Chair
(Portions of this article are from "Biz Eye for the Law Guy (or Gal)" by Phil Strauss, ACC Docket , April 2005, reprinted with the permission of the author and available to ACC members at www.acc.com/resource/getfile.php?id=5720.)