Specific FUD Cards
Specific Reasons from following FUDs for nearly four years have open my eyes on why OTCs carry such a large oversell. The bottomline is the MMs are making the market primarily for the "Business TO Failure" (BTF) and profit on the business failure. Simple as that…
So in addition to the basic general causes of business failure, public companies have the MMs and the FUDs (internet public image vessel) to contend with on a daily basis. This composition is merely an observation of what I believe to be the Specific Reasons for MMs and FUDs doing what they do with such massive interest.
Lets look at some of the primary factors used by FUDs. In most small start-up businesses, management inexperience or poor decision-making ability is the chief problem of the failing enterprise. FUDs will pick up on that and so do the Market Makers. It is up to the management of the company to realize they do have enemies that will profit from their ignorance, incompetence and in abilities.
Management Incompetence Card. This is a favorite card of FUDs because it can be supported statistics so the odds are in their favor. Even Dun & Bradstreet statistics show that 50 percent of the business failures are attributed to the incompetence of the top management. Sometimes the top management of the small business does not have the capacity to operate it successfully. On CBQI this is where the first FUD has really tried to make a home run on a foul ball. He merely states Bart lacks the leadership ability and knowledge necessary to make the business work. Of course he can always support his opinion that many top managers simply do not have what it takes to run a small enterprise.
First he attacked Jon Harris who had the resume clearly showing experience and competence. Once John did not go to Washington he merely just transferred the same FUD tactic to Bart and Pat. However, he has not specifically played as heavily with John Moran and Quantum Net. So now came the lack of experience card.
Lack of Experience Card Once John was out of the way this is where the FUD tactics went next. Why because a lot of OTC top managers need to have experience in the field they want to enter. Bart being an attorney just fed into this FUD tactic. Even though Bart has been extremely successful in his field, once he expanded into another "unrelated field" that jetfueled (pun intented) the FUD tactic because the play is Bart knows little or nothing about the field he is pursuing.
Now the FUD tactic steered away from the argument that top management did not possess the managerial experience required building and operating a functional organization. Without competent leadership to make managerial decisions, the business is doomed is the basis of this tactic. I believe a solid argument could be made that Bart has had experience in this area and has demonstrated it well especially with the acquisition of Quantum Net.
Finally, this part of the card has been tagged a bit but the second FUD’s arrival. Basically Bart may have unbalanced experience that creates problems for the business. Ideally, the top management should have adequate technical ability (a working knowledge of the physical operations of the business; sufficient conceptual ability); the power to visualize, coordinate, and integrate the various operations of the business into a synergistic whole. So management also needs the skill to manage the people in the organization and motivate them to higher levels of performance. This has really not been played well but only touched on.
Again the underlying basis for this FUD card/tactic can easily be a survey of business owners conducted by Dun & Bradstreet, which suggested that the successful owner needs "balanced experience" in purchasing, production and products, attracting customers, and handling finances. The attorney top management (Bart) turned IT infrastructure CEO may not be able to focus on the production aspect of the operation to the exclusion of the selling function so he would be guilty of unbalanced management. Proof could be that it shows up in the business as terrible sales revenues and no contracts or new business.
SO as you can see the "Poor Management Card" is based on incompetence and lack of experience with the top management of a company, which in fact causes over 90 per cent of all business failures in any given year!
Poor Financial Control Card. Sound overall management is the key to a small company's success, and effective managers realize that any successful business venture requires proper financial control. (The "Burn Rate") Why? Because the margin for error in managing finances is especially small for most small businesses. This FUD tactic has three notable pitfalls affecting a small business' financial health. They are commonly known as: under capitalization, lax Customer credit policies, and over investing in fixed assets.
Lack of Capital. Many start up companies make the mistake of beginning their businesses on a "shoestring," which is the fatal error leading to business failure. FUDs really play this card effectively as the oversell by the MM grows. Market makers and FUDs realize that management tend to be overly optimistic, and, as a result, they often misjudge the requirements of going into business. SO the oversell and FUDs basically seems, to me at least, to focus on one particular objective. Since the company does not have enough money, then force the company to borrow money from banks, shareholder/investor friends or especially the loan sharks that deal in OTC start up companies that take stock as collateral. This basically results in a loss of profits through interest rates not to mention the share price hammered by the dilution of the stock collateral. These debentures always seem to have special terms that eventually causes the sacrifice of profits through loss of discount and loss of share price. If the MMs and FUDs are successful they have merely cause the management to give the company away to the OTC loan sharks. Another words: End of story. FUDs and MMs make a mint on the oversell.
Lax Customer Credit. The pressure for a small business to sell on credit is intense. The manager may believe that they can gain a competitive edge by granting credit, or she may feel forced to keep up with competitors who already sell on credit. Whatever the case, the management must control credit sales carefully and failure to do so can devastate a small company's financial health. Once this shows in the filing the FUDs go to work for they realize poor credit practices are common to many small business bankruptcies. Before creating a policy of credit sales, the small business manager should ask herself two questions: Do I have enough capital to support credit sales? and Do I know how to collect? Because of the lag between the sale of an item and the actual collection of the proceeds, a credit policy requires additional capital. Usually, if credit terms are 30 days, an additional capital investment equal to 45 days' sales is required. A FUD example would be if company sells $16,000 per month in cash, the implementation of credit sales may require an additional $24,000 in capital to continue operations. They can also make a point that credit collecting can be an extremely difficult task requiring a great deal of skill and persistence. Some people are simply not good collectors, and this results in uncollected accounts and therefore lower net profits.
Over investing in Fixed Assets. Many small business managers invest in an inordinate amount of capital in land, buildings, equipment, and other fixed assets. This money normally comes from working capital or borrowing, so when expansion is needed most, no funds exist to finance it. This is not the case with CBQI.
Failure to Plan Card. So many OTC top management types do not realize the importance of proper planning to their firm's success. Failing to plan the company's future at the outset will have a devastating effect on its existence. This failure to plan that weakens the entire company often manifests itself in two ways: lack of a strategic plan and unplanned expansion. CBQI has not been remotely quilty of this FUD Card. They have definitely had a plan.
Lack of a Strategic Plan. A strategic plan plots the overall direction of the company and identifies methods for maximizing its strengths and overcoming its weaknesses. It addresses questions such as:
· What business am I in?
· What are my strengths and weaknesses?
· Who are my customers?
· What are they buying?
· Who are my competitors?
· What are their strengths and weaknesses?
Again CBQ has addressed this on numerous occasions.
Unplanned Expansion Card. Growth is a natural, healthy, and desirable part of any business enterprise, but it must be planned carefully. Ideally, retained earnings or by capital contributions from the owner should finance expansion (note: here Bart exercised options in the .50 price range but his options were $2.125 rarely have I seen this in an OTC). Most OTCs end up borrowing at least a portion of the capital investment. Expansion usually requires major changes in organizational structure, business practices such as inventory and financial control procedures, personnel assignments, and perhaps-other areas. But the most important change occurs in managerial expertise. This is why the Quantum Net acquisition has played a major role in this tactic. As the business increases in size and complexity, problems tend to increase in proportion, and top management must learn to deal with this. The pedigree resume fo John Moran nails this card.
Inappropriate Location Card This was nailed in the spring of 2000 when the corporate offices were moved to Washington DC. For any business choosing the right location is partly an act and partly a science. Too often, business locations are selected without proper study, investigation, and planning. Some beginning companies choose a particular location just because they noticed a vacant building or where they happen to be like somewhere in Oklahoma when LA would best best suited. But the location question is much too critical to leave to chance.
Another factor to consider in selecting location is the amount of rent to be paid. Although it is prudent not to pay an excessive amount for rent, top management should weigh the cost against the location's effect on sales volume or client base. So, location has two important features: what it costs and what it generates in sales volume.
Lack of Inventory Control Card. Normally, the largest investment an OTC must make is in inventory. However, inventory control is one of the most neglected of all the top managerial responsibilities. Insufficient inventory levels result in out of stock scenarios causing customers to become disillusioned and not return. A more common situation is that the manager not only has too much inventory but also too much of the wrong type of inventory. (Suntea vs Alavache) Many OTCs have an excessive amount of working capital tied up in an accumulation of needless inventory. CBQI does not have this problem. Another inventory management problem encountered by OTCs is improper pricing. Most OTCs tend to under price their goods and services, resulting in lower revenues and profits. OTCs often provide faster, more personalized service or unique products, but they fail to charge enough for them.
Improper Attitudes Card. A number of obstacles to success may arise from the attitude of top management. CBQI has done this or at least I know BART has by calling him every flipping day just about. Bart knows he must be prepared to work hard and make sacrifices. Success requires hard work and a lot of it. To date I have yet to hear the fatal mistake of saying, "I'm the boss and I can take off whenever I please." This is a red flag to me because it demonstrates lack of enthusiasm and guidance, sp to me the business is likely to fail. Also Bart has not show another red flag of overextending himself. He seems to have his outside interest in a good balance in public speaking and other various scenarios. However, I have called at 6:00 PM and got him in his office every now and again to see if his is always there. Sometimes, as I have found, is good but all the time is a red flag. Also if I can reach him all the time then I would have to wonder what the devil is he doing. So bottom line I feel he is well balanced in the overextending scenario.
Finally, does he demonstrate and practice ethical behavior. To date I have not caught a lie, or contradiction. This is extremely important to me because OTCs who practice deceit may profit in the short run, but, in the long run, they usually lose and so do we.
Remember this whole composition is merely my assessment of observations. Hey I could be totally wrong.
Gary
AI
