Being involved in a startup, sometimes you need tools that are “just good enough”.  There is no reason to go out and spend hundreds of dollars on software licences so that you can be like the corporate guys – there is an open source alternative for almost every tool you might need out there.  Here is a great reference (open source alternatives) for searching for said tools.

So, Mom, if you are reading this there are two default settings changes that I want you to make to Thunderbird so that it performs in a manner similar to the accepted norm.

First, I want you to make the following change so that  when you reply to a thread, it places your reply at the top of the thread as opposed to the bottom:

Thunderbird Reply Above Quote

Step 1. Open Thunderbird and select “Tools”

Step 2. Select “Account Settings…”

Step 3. Under your email account select “Composition & Addressing”

Step 4. Under composition, make sure that “automatically quote the original message when replying ” is selected

Step 5. Most importantly, below that, change the drop down so that – Then, “start my reply above the quote” is selected.

Step 6. Click “Ok”.

While we are at it, we are going to fix another pet peeve that Thunderbird does by default which is forwarding messages as attachments instead of inline text – as a default behavior.  To make this change:

Step1. With Thunderbird open select “Tools”

Step 2. Select “Options…”

Step 3. Select “Composition”

Step 4. Change the drop down for Forward messages: to “Inline”.

Step 5. Click “Ok”.

Thunderbird Forward Messages Inline

I love you mom.

In my former life as a VP of software development for a development/consulting company, we estimated that we had to carry 25%-30% extra developers, because of IE6.  That means out of every 1o developers we had, 25%-30% of those man hours went into “dealing with” IE6.  We had a number of screens that we replicated in our applications, one screen utilized by IE6 and the other version utilized by the rest of the browsers.  Granted, the company was 100% focused on large enterprise customers as the user base, which has been slow to adopt IE7 and IE8 as their corporate browser of choice.

For those not familiar with software development, the vast majority of developers develop software using the Firefox browser.  The browser has a number of developer tools (mainly 3rd party add-ons) that substantially increase the productivity of the developer.  And by now you’ve probably deduced that not all browsers are equal. IE6 has a lot of known bugs that were just never fixed by Microsoft and it just wasn’t built to utilize many of today’s technology like off-line capability, CSS/Layouts, and a good JavaScript engine.  So, over time, developers hacked their way around IE6 (and to some degree IE7 & IE8) as it couldn’t be ignored even though it should have been put to bed.

Did you know?

IE6 was released in August 2001, here are a few major events that have taken place since then:

• 9/11 happened two weeks after the release of IE6
• Terminator 2: Judgement Day was the top grossing movie of the year
• Life House – Hanging by a Moment was the top song of 2001
• Enron scandal starts to unfold
• 13 months later Firefox 0.1 released (most importantly they are now at version 3.5.3)
• I’m 8 years older than I used to be

Introducing a smack down, corporate America style.  Google has release a beta version of Google Chrome Frame, an application that has to be installed on the computer.  But what it does, via a single meta-tag in the code, is serve up the application inside of IE6, IE7, or IE8 utilizing Google’s Chrome engine.  So in essence, Google has made Microsoft’s browsers work.

I gave it a quick test drive and it seems to work quite well, granted it wasn’t thorough testing.  The image below is an image of my Wyoming Road Trip site in native IE6 with all of the IE6 “hacks” removed.  What you can’t tell is that I’m attempting to mouse over the CSS driven menu bar.

Native IE6 Mouse Over CSS Driven Menu Bar

You may have to click on the images to see them full size to see the quality differences.  Notice the quality of the images in native IE6, the blue “shading” or whatever it is above the menu bar, and the twitter image without legs.

Now lets look at the same image also in IE6, running Google’s Chrome Frame.

IE6 Using Google Chrome Frame

Notice a few things, the first is that the IE logo on the top left corner of the screen is replaced by Chrome’s logo – very nice touch.  Also notice how much more crisp the images look, no more blue “shading” above the menu bar, the menu bar actually works when you mouse over it, and the twitter bird has legs!

I can’t even begin to express how cool this is, and the impact it COULD have.  I fear however, that it will not have the impact that one would hope for.  The only reason that IE6 has even 1% market share let alone the 20+% it does have, is once again, because many enterprises have not moved to IE7 or IE8 for various reasons.  They usually state security and training issues, I call BS on both of those excuses.  But the problem is that there are still a lot of enterprise users that don’t have access on their desktop or laptop to install software – hell if they could they would be running IE8, Chrome, or Firefox in the first place.  So while Google has successfully slapped Microsoft in the face, will the adoption of this frame really make a substantial difference, or just be another distraction for developers to worry about?  I hope the former, what do you think?

What I have learned to do is to back into my revenue calculation, using a worst case scenario analysis.  I start by building a spreadsheet that has all of my revenue drivers – assumptions used to derive the revenue calculations.  I then build out an income statement, once again, using the revenue drivers to calculate the top line of the income statement.  Finally I build a cashflow statement that ties to the income statement in a couple ways, but primarily via the net income.

When doing a traditional business analysis, it’s easy to get wowed by the “estimated return”.  Some folks will do a sensitivity analysis on the estimated revenues, maybe the estimated expenses, and come up with equally wow’ing returns which do nothing more than distract you from the real question at hand – is this opportunity viable.  As I’ve mentioned, the problem is that while guestimating expenses and start-up captial requirements can be done with relatively fair accuracy, in many business plans doing the same for revenue isn’t possible.  That’s why this approach is so valuable.

So, once you have your revenue assumption sheet linked to your income statement and likewise linked to your cashflow statement, you can start the process of backing into revenue.  On the income statement, you can start by putting in reasonable expectations for expenses, taxs, etc.  On the cashflow statement, you probably have a reasonable idea of how much start-up capital you have access to, or will need to operate the company prior to having a stable revenue stream.  In addition, based on the net cashflow you can do some simple hurdle rate calculations such as net present value (NPV) or internal rate of return (IRR).

Once all of those things are set, then go back to the revenue assumption page and start entering assumptions until you get to a point where the business plan is just able to get by.  The spot where, “if at a bare minimum we are able to do this revenue, we can keep our doors open for business”.  This is really the make or break revenue of the company assuming that your access to start-up captial is limited to some ceiling.  At this point, you can now step back and take a holistic view of the revenue assumptions and projections and focus on the companies ability to meet those revenues.  The question then becomes about “can we make this revenue, or not?”.  Hey, if the company actually does 2x your assumptions down the road, congratulations, it’s a good problem to have!  But in your analysis, assume worst case, and back into the minimum revenue that you can derive to have a operable company (or opportunity you are willing to invest in), and if you have confidence that your company can meet those minimum requirements, you might have a winner.

I see it time and time again – many times from people making major financial decisions for their company.  Some will argue that it is a bug in Excel, and according to some articles I’ve read the behavior is different between different versions of Excel, I don’t know if that is the case or not.  My argument is that people should understand the concept prior to blindly using the formula – and perhaps some clearer user instructions from the software providers.

What am I talking about?  Improper use of the NPV (net present value) formula in Excel and OpenOffice.

Net Present Value is the comparison of a dollar today versus the value of a dollar in the future.  Presumably if someone offered to give you a dollar today, or a year from now, you would pick today.  If I were given a dollar today, I could invest it at some interest rate and one year from now I would have a dollar and change.  That obviously has more value than being given a dollar a year from now – the difference being the change.  NPV is one of the primary analysis tools for valuing business opportunities.  Those decisions might include plant expansion projects, purchase of a new company, etc.  At the end of the day companies and entrepreneurs typically spend money today to make money in the future and NPV takes those expenditures (cash outflow) and profits (cash inflow) and gives you the “net value of the opportunity”, in today’s dollars accounting for inflation and returns in a discount rate.  Now, it is important to note that without a crystal ball, future cash flow from an investment is typically based on estimation, but that’s a different discussion.

What should be understood about the NPV formula in Excel and OpenOffice is that it gives the net present value of FUTURE cash flow.  If you include time 0 (today) cash flow you are improperly discounting the value of today’s dollar.  The net present value of a dollar today, is a dollar.

See the example below.  This particular example was done using OpenOffice, but you will get the exact same result using Excel.

NPV Calculation in OpenOffice

What you see is a series of cash flows, a year 0 (today) cash outflow of $1M, and then a series of outflows and inflows ending in year 7 with an inflow of $1M.  For the sake of this example, a discount rate of 10% will be used.

There are two results shown below the cash flow series, the top NPV result ($175,653) being incorrect and the source of many mistakes that I see from time to time.  The bottom result ($193,218) is the proper calculation for the NPV of this cash flow.  The mistake, which in this case causes for an understatement of the value of the investment, is caused because the cash flow series is being treated as if it were all in the future – and that is not the case.

The proper use of the equation when calculating an NPV on a series of cash flows is shown on the bottom result, ending in a NPV of $193,218.  The NPV formula, when used properly, should include the range of FUTURE cash flow, and that result should be added to the time 0 (today) investment.

Happy NVP analysis!