First Quarterly Board Presentation and I bombed...HARD! Lesson learned!

Water Cooler
#1

Grab a tissue,

So a week ago, I flew in to Atlanta for my first Q3-Board-Meet. Very excited. I was told, I was going to just be asked some minor questions on the financials, since nothing was really out of the ordinary from Q2 and we were proceeding on the budget projections. Also my main thing was a small (10 slide) PPT presentation on hedging. Or, rather which hedging strategy to pursue, ie option collar, swap, or naked put.

So what do I do? I put together some slides on the normal stuff, Income, Balance, CF, and then some analysis on some key drivers. And, then obviously my hedging model, oh also my forecast model. It was my first, so I am trying to be well prepared.

On the financials, I learn that the board doesn’t give a shit about anything but EBITDA, which basically is a proxy for cash in their pockets, and Capex. They didn’t even want to see anything else, nor did they care. They said they wanted to see a “Flash Report”, which provided all of the information needed for the board to make decisions on a company. And get this, it HAS to all fit on ONE PAGE. ROFLROFLROFL! The reason is even more hilarious. The Chair is associated with another board, a Gas Fuel company which is public, and “they do it.” Except for one thing Bob, they have one profit segment, and this refinery has five. And, I saw this supposed flash report from the public firm, and like a fourth of it was a chart which shows gas prices, and nothing else. No comps, just whatever gas prices were; I forget the increments. What the hell is seeing a chart like that on a “flash report” going to tell you? Great Kerosene price was $2.89/Gal last month…yeah! I know I am a first year pe analyst, but come on, I am not retarded.

Now here is what really pissed me off. In my mind I imagined meeting some very brilliant people. I mean these guys have made it right? They are loaded, and are throwing millions left and right, they must be amazing. They are on the board of a PE fund for christ’s sake. Not really. They were dumb as hell. They couldn’t follow simple math. One company I was analyzing, an oil refinery, instead of showing volume (BBLs refined) I showed them Velocity (which I defined as the derivative of speed in this case, the time in between deliveries). Hence, more volume, lower velocity, higher Acceleration (derivative of Velocity), they couldn’t comprehend that. Kept asking me, “So whats the Volume?” I was told I was “unprepared”.

Last but not least: The Heding Model. They didn’t even want to see it. Seriously put in like 200 hrs in to this thing. Said it was “unneccesary”. The douchey Chairman said, “…an attempt at imprecise precision.” Just to paint a clearer picture for you all, imagine a business model where you literally can not control your main driver, and it is very volatile. What do you do? Hedge downside! Just super super super frustrating and dissapointing, to meet this type of rejection, from people who don’t want to learn the business model. I was down right embarrassed in front of everyone.

Alright I am done, sorry. I just figured, smaller firm, less politics. Seems smaller the firm, more politics.

Lesson: “JUS SHOWEM DA EBITDA”! Little thing my CFO came up with. Fortunately he likes me, otherwise I would have been destroyed.

P.S. Had to vent to someone.

#2

I’ve had similar experiences in front of senior management of well respected firms. I think my expectations were way too high going in. I just assumed these guys would be intimidatingly smart. Nope. 90% of them appear to have gotten where they are through sheer luck.

#3

i wouldn’t bash the board out of hand. what may seem like stupidity or pre mature rejection may really be the benefit of many years of experience of knowing what is important and what is not. decision makers know not to get bogged down in technical details of complex topics (like hedging). they want the practical results of an analysis, and if it doesn’t pass the common sense test, it is worthless. Being able to boil down a complex topic for decision makers into something that can be easily understood and makes common sense is a valuable skill. maybe use this experience to develop that ability. in short, in all likelihood, it’s not them, it’s you.

#4

^^^^^This You failed hard. Understand your audience. You weren’t in front of a quant or risk group. Telling the Chairman of the Board that acceleration is the derivative of speed? And then getting flustered when he didn’t understand? FAIL You told him how it was calculated, not what it was.

#5

Listen to Turd and Blake. They’re giving you some really good advice. Before you present to them again, try reading up on some presentation skills, such as Minto’s pyramid principle or what Bain calls “Answer first.” Learning how to effectively present to different audiences will help your career more than knowing how to hedge fuel costs

#6

Use the previous quarterlies as a guide / ask what is required. It’s not politics. You are blinded by what you wanted to say rather than what they wanted to hear. Not the worst mistake in the world as you clearly have good intent. Just have to figure out the audience. Sure you will get it right next time.

#7

I’ve learned this the hard way myself as well. Some people say experience doesn’t matter, but when it comes to dealing with people and understanding what they want it’s everything. I made a similar mistake in my first few months on the job. I went way overboard on a project even though a senior guy told me exactly what should have been in the report. Needless to say I wasted countless hours producing something that was only seen by my eyes. Be careful with the impressions you form about others. Those people are on the board for a reason. They were undoubtedly very successful at something and it may not have been finance related. The last thing you want to do is allow your body language and tone to give away what you’re really thinking. I have some insanely smart friends that are incredibly good in their respective fields of math, engineering, etc… but cannot grasp the concept of time value of money.

#8

It’s true that in business, you need to present the answer first, and then go into your reasons for this. When you give your reasons, you start with the most important one first and then move down the line to less important but relevant reasons. That’s the opposite to the way that academics teach you, where you start with the question, analyze the data, and come to a conclusion. When you’re first learning something, it’s good to go through the analysis and get to the conclusion, and that’s why teachers like to go that way - they are trying to evaluate your thought process more than your conclusions. The “give answer first” then reasons in order of importance works well in business environments because time is short. If you get cut off by some other issue or people just get bored or want to move on, you’ve always covered the most important facts in whatever time you ended up having. As for their not being interested in hedging models and stuff: they clearly don’t think it’s relevant, or at least a minor consideration. They might be wrong about that, and if you think they are, then that needs to be one of the first points. So your next page is going to be: Here’s the EBITDA. It’s a Buy/Sell. Reasons to buy 2-5 bullet points. Risks or things to watch or that could make one change one’s mind in the future 2-5 bullet points Supporting analyses on additional pages, which you don’t pass out but have on hand in case you are asked. If you are advocating not buying, then you change your bullet points to “reasons not to buy”, and “things that may make us change our mind” Bullet point formats are great. If they want to ask you questions about a point, you give your reason and (hopefully) sound brilliant.

#9

Anyway I think it was a fools errand constructing an analysis on velocity as a driver, a lot of these guys just want consistency in the types of reports they are getting and don’t want to think deeper then just see a key snapshot of metrics that may or may not be relevant. I know if I presented my CFO with something like that he would just scratch his head and tell me to redo it.

#10

I’ve been in the OP’s position, except with the principals of my company. I deal directly with them and in the beginning I had a hard time understanding how they convinced institutions to give them money to invest. they seemed to be decidedly non-quantitative in their analysis and i didn’t understand how they could make informed investment decisions using the type of analysis they relied on. as time went on i learned to appreciate their ability and realized the simplicity of their analysis was really the product of vast experience and knowing what is important. on the surface it appeared that they just went by rules of thumb. but the truth is that they know the market so well that they don’t need a spreadsheet model to tell them when an investment is a good one, just a few metrics. don’t get caught dismissing experience. it’s dangerous and potentially detrimental to your career, as others have stated.

#11

velocity is derivative of speed and acceleration is derivative of velocity? really?

#12

Read and reread the posts above - take a lesson from this.