Better Business Writing Donald W. Reynolds National Center for Business Journalism Prepared by Curt Hazlett Senior Seminar Associate Enjoy the tutorial! Defining our terms To begin, let’s get basic: What is good business writing? Good, after all, is a subjective description. Good business writing uses the standard journalistic skillset – accurate reporting and informed, lively writing – to explain four of the most important topics in the world, which are: •How companies create, produce and sell the products that shape our lives •How jobs are created or lost, either because of local decisions or the impact of the broader economy •How the world’s constantly changing economy shapes all of our lives •How we spend and invest they money we earn Viewed that way, it’s easy to see why business coverage is so important. It is truly at the center of our readers’ lives. But there are some big challenges inherent in covering business. The biggest: Covering business is more complicated than covering fires. Business and finance can be hard to understand and even harder to explain in easily understood terms. Consider the Enron story. Enron is among the largest corporate frauds in American history. Its impending collapse managed to go uncovered largely because of the complexity of the business in which it was engaged. And what business was that? Let’s see . . . Enron began as an energy trader and later got into natural gas and electricity production, then moved into dozens of other businesses that seemed promising – even unrelated ones like fiber-optic cable. . . Along the way it discovered huge profits in the trading of derivatives – complex financial contracts whose value is derived from an underlying commodity, stock or bond. Derivatives usually are used to hedge a financial risk, but Enron used them solely to make a profit and cover losses created by its core businesses. Derivatives are a hugely important part of the financial world, yet most readers have never heard of them. To keep its stock price high, Enron also created a web of complicated off- balance-sheet deals, then used accounting loopholes to cover them up. When Enron unraveled in 2001, it came as a shock to those who followed it. The reason? The company was so complex that no one understood it – not even the analysts who followed it. Complexity like that makes business writing hard. First, you need to have a grasp of the topic. (A spot quiz: Can you explain what a futures contract is? If you can’t, look it up.) Second, you need to have the skill to explain arcane matters in a way that can be understood by the reader. Here’s how USA Today explained what Enron’s fall – one of the most concise explanations anywhere: The Houston, Texas-based company, formed in 1985, grew into the nation's seventh-biggest company in revenue by buying electricity from generators and selling it to consumers. It was admired on Wall Street as a technological innovator. But it used complex partnerships to keep some $500 million in debt off its books and mask its financial problems so it could continue to get cash and credit to run its trading business. Enron officials have acknowledged that the company has overstated its profits by more than $580 million since 1997. In a six-week downward spiral last fall, Enron disclosed a stunning $638 million third-quarter loss, the Securities and Exchange Commission opened an investigation into the partnerships and the company's main rival backed out of an $8.4 billion merger deal. Enron filed for protection from creditors on December 2 in the biggest corporate bankruptcy in U.S. history. Its stock, worth more than $80 about a year ago, has tumbled to less than a dollar a share. Enron's collapse left investors burned and thousands of employees out of work with lost retirement savings. USAT knows the value of business news – a quick look at the Money section confirms that. It also knows that good business writing has to be exceptionally clear, because business itself can be so confusing. Looking for an explanation of Enron that really captures the company’s absurd complexity? Take a look at this one, which circulated on the Internet in the months after the collapse. It’s a joke, of course, but it succeeds is capturing the essence of Enron: Capitalism: You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income. Enron capitalism: You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. Where business writing fails So this much we know: Business writers need special skills. Without knowing the basics of business – balance sheets, financial terms and at least rudimentary economics – you’ll be powerless to understand (and therefore explain) the forces that affect your readers’ lives. The other tutorials in this series – by Chris Roush, Jimmy Gentry, Merrill Goozner and myself – will look at the nuts-and-bolts issues of financial statements, financial markets, the economy and using numbers effectively. This one will be a bit more general in nature: We’re going to examine ways in which we can tell good stories. And make no mistake, there are millions of great business stories waiting to be told. As business writers, we need to cover the basics – quarterly earnings stories, for instance. And we need to get them right. But we also need to look for deeper stories. We need to tell readers about challenges of running companies – about the quest to develop new products, the constant fight to stay competitive, the need to rein in costs yet keep a productive workforce. These are the stories that bring business to life and help readers understand the system that produces goods and jobs and profits. They also can be the hardest stories to write. They require us to push for access that a company might not initially be willing to provide. They force us to cast a wide net for sources both inside and outside the company, from suppliers to competitors to regulators. And they require us to stay on our toes when it comes to storytelling techniques, such as narratives. Let’s look at some examples . . . Small details, big story Charles Fishman, a writer for Fast Company magazine, used a pickle company’s experiences to frame a story about Wal-Mart’s impact on its suppliers and the national economy. Part of it is on the following page. Note how Fishman uses description and detail at the top of the story and quickly introduces the scope of the piece. A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic's gallon jar of pickles. Wal-Mart priced it at $2.97-- a year's supply of pickles for less than $3. "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand." Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a service for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement. Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart. The full text of the story can be found at: http://www.fastcompany.com/magazine/77/walmart.html Fishman’s story was one of the first to look at the downside of Wal-Mart’s fabled buying power, and he accomplished it by opening up the narrative of Vlasic’s relationship with the retailer. All it took was a reporter curious enough to wonder how Vlasic could sell a gallon of pickles for $2.97. Also on the subject of Fishman: He won a Gerald Loeb Award last year for another of his pieces in Fast Company – a look at the growth of automation in our lives, from ATMs to airline check-in kiosks to automated fast-food. The story asks (and answers) a bottom-line question – Can this be good for our society? – and touches on all of our hometowns. Read it at: http://www.anderson.ucla.edu/documents/areas/adm/loeb/05d10.pdf Seven tips for great stories It isn’t hard to find great business writing. You need only to read the Wall Street Journal, The New York Times, Fast Company and the other top journals in order to see a slew of it. The question is how to get good at it yourself. We can’t promise you’ll be a star, but here are some broad suggestions that will make you better at your craft. 1. Write about people, not just things Many reporters cover local businesses wearing the journalistic equivalent of blinders. They visit the company, report on its sales trends, and write the story from that perspective. With a little more effort, you can create context by finding people outside the company who have a stake in what’s produced. That’s what the Associated Press did in this report about flat- panel televisions: Bud Werner and his wife are longtime movie buffs. For more than a year, he pined for a flat-panel television, thrilled by 60-inch screens thin enough to hang on a wall and turn his living room into a minimovie theater. But he couldn't overcome sticker shock -- some flat panels were selling for as much as $20,000 at first, as much as a new car. Like a lot of fans of flat-panel TVs, Werner, who owns a sign-making business, held off buying. Until now, that is. Prices for flat panels have finally begun to tumble -- by as much as 35 percent in the past year -- as soaring demand for the two leading flat- panel technologies, plasma and liquid crystal display, or LCD, attracts a host of new competitors. "I'm excited," said Werner, 54, whose patience was rewarded this month when he bought a 50-inch plasma television at Best Buy for $3,800. "We already have the wall picked out where it's going to hang." Lesser-known brands, such as Westinghouse Electric Co., Regent USA's Maxent, Syntax Corp.'s Olevia and Norcent Micro Inc., are slashing prices to compete against more-established names like Sharp Corp. and Sony Corp., forcing them, in turn, to charge less. Semiconductors and other TV components also are getting cheaper, and the industry continues to find ways to trim production costs. Now, a 42-inch liquid crystal model retails for about $4,200 on average, and the same-sized high-definition plasma sells for around $2,900, said Riddhi Patel, senior analyst for iSuppli, a market research firm in El Segundo, Calif. 2. Tell readers a story In our rush to report the news, we sometimes forget to use descriptive powers to tell a story. That often happens when we cover meetings. We report what the CEO told stockholders, but not what the room looked like or what the people in the back row thought. Seattle Times reporter Monica Soto Ouchi took an observant approach when she covered the annual meeting of Starbucks: The only thing missing was Oprah. There was the couch. The touching stories. The grown men shifting in their seats, blinking back tears. But yesterday was about another O — Orin Smith. The legendary Starbucks chief executive will retire in March, but not (shareholders learned) without a proper sendoff. Starbucks yesterday produced a three-hankie tribute to him at its annual shareholders meeting at Marion Oliver McCaw Hall. More than 5,200 shareholders attended the event; the company added an overflow room after some complained that seating was full. (Starbucks has gained standing for putting on one of the better meetings on Wall Street.) "It's theater with coffee," said one woman after the meeting, clutching her purse outside the hall. The point: Don’t go anywhere without being observant. What does the CEO have on the walls of her office? What does the plant floor smell like? What does General Foods serve in its employee cafeteria? Take readers along on your reporting trips by finding room for description and color. Remember that the best business journalism consists of not just of facts, but of tales that draw readers in. Consider this definition of story by The New Yorker’s Bill Buford and try to apply it to your work: “It is a piece of writing that makes the reader want to find out what happens next. Good writers, it is often said, have the ability to make you keep on reading them whether you want to or not – the milk boils over, the subway stop is missed.” 3. Unleash your curiosity Sometimes the best stories happen when you let yourself wonder: What’s going on here? When Davan Maharaj of the Los Angeles Times became aware of a growing number of accidents in big-box discount stores, he started picking away at what eventually became a blockbuster story. Here’s the top: Few of the millions of shoppers who each day crowd into the retail canyons of big discounters such as Home Depot and Wal-Mart expect to be crushed in an avalanche of merchandise. But that’s exactly what happened to Mary Penturff. The 79-year-old Santa Monica woman was looking for lattice to stake her morning glories in November in a Los Angeles Home Depot when a 19-year- old forklift operator accidentally tipped a load of lumber stacked several feet above her. She was crushed to death in front of her horrified daughter. “You expect to die or get injured if you go to war or if you speed on the freeway,” said the daughter, Rebecca Hamilton. “The last thing you expect when you enter your neighborhood store is that you won’t come out alive.” Perturff’s accident was just one of thousands of injuries and deaths involving shoppers that resulted from falling merchandise in warehouse-type stores, according to a Times examination of court records from around the country. This was an important business story that helped change the way big-box stores operate, and possibly helped save lives. Beyond that, it was a great read – a business story that broke news and told a compelling and scary tale. Maharaj got it by following his instincts and satisfying his curiosity. I’d venture to say that there is a great story somewhere on the beat you’re going to cover that could be opened up in the same manner. 4. Look for stories everywhere The beauty of business news is that it can be found on every beat, from city council to sports franchises to local hospitals. Often those stories don’t get done because they fall outside the interests or skills of the beat reporter. That’s an opportunity. Look at the top of this story in the Charleston (W.Va.) Gazette, which won a Loeb award for reporters Scott Finn and Eric Eyer in 2003: There were no checks and balances, no internal controls. After floodwaters ravaged 10 schools in Wyoming and McDowell counties on July 8, 2001, all the rules were thrown out. “It was like a license to steal," said David Sneed, architectural chief at the state School Building Authority. Some schools had been transformed to mucky fish tanks. Mold, mildew and slime grew everywhere. It was a mess. Assistant state schools Superintendent G.A. McClung was given a charge: Get the schools open on time. His orders came from state schools Superintendent David Stewart and Gov. Bob Wise. McClung didn't hesitate. "I needed a couple of people who could flat-out get this job done,“ he said last week. So he turned to a friend: Phillip "Pork Chop" Booth. Booth was a college buddy McClung met 30 years ago. They had stayed in touch. They hung out together at the condominium Booth rented at Glade Springs Resort near Beckley. Booth had formed a partnership with the president of a well-respected Charleston contracting company, Carl Agsten. Booth's company sold school furniture. Agsten's company, Agsten Construction, built schools. They accomplished their mission. Schools opened on time. Students walked into classrooms with new chairs, desks, marker boards, carpets, a fresh coat of paint. "It was a remarkable performance," McClung declared. Continued . . . But every step of the way, people asked questions. Something didn't seem right: School furniture and kitchen equipment got dumped that shouldn't have. Vendors charged exorbitant prices - up to four times the going rate. Booth and Agsten received exclusive deals. Competing vendors were shut out and told to go home. McDowell County school administrators hand-delivered a $350,000 check to Booth at a Charleston hotel. Agsten hired the son of Department of Education Facilities Director Bill Elswick to handle payroll and pick up checks after the flood. Elswick, who supervised much of the flood cleanup, recommended his son for the job. And who was Booth, known by everyone as "Pork Chop"? Who was the guy with the fluorescent green sport coat who boasted of his friendship with McClung? Last week, McClung resigned under pressure amid an investigation into the $2.3 million furniture deal he arranged for Booth. He has denied any wrongdoing. The Department of Education's internal investigation will continue this week. You can read the whole story at: http://www.anderson.ucla.edu/documents/areas/adm/loeb/03c24.pdf While you’re there, jump over to the Loeb site and check out some of the other work that has garnered prizes in the past five years. You can find it at: http://www.anderson.ucla.edu/x8826.xml The stories have this much in common: They tell us something we don’t know. They explain their topics clearly. They are easy to read and sometimes downright entertaining. And they represent what we should all be aiming for in our writing. 5. Go easy on the numbers We’re going to devote an entire tutorial to numbers, but I wanted to get this suggestion out there right away: Use them sparingly. If possible, don’t use them in the lede at all. Why? Readers tune out numbers. Better to explain what’s happening in plain language, then buttress that with numbers later on. An example: Instead of this: Jones Corp. reported Thursday that its third-quarter net income rose to $3.4 million, or $1.02 a share, on sales of $22 million, compared to second-quarter net income of $1.9 million, or 35 cents a share, on sales of $17 million. It attributed the gain to better sales of its solar-powered hair dryers. Try this: Jones Corp.’s solar-powered hair dryers are suddenly hot. Earnings jumped last quarter as sales of its new product soared, due in large part to the widespread power failures across much of the nation. Put the numbers farther down, after you’ve hooked the reader. They’ll stick with you longer that way. 6. Keep it tight Ask yourself if what you’ve just written is as clear and tight as it possibly can be. A good rule of thumb: Never write a lede longer than 20 words, the length most people can absorb in one reading without starting all over again. Another: Limit your ledes to two pieces of punctuation. That prevents you from inserting subordinate clauses that can derail the reader. 7. Turn coal into diamonds That’s the advice of Roy Peter Clark of the Poynter Institute. He means never kiss off an assignment because you think it’s insignificant. Learn how to keep your curiosity sharp, almost like a kid’s, and never inhibit yourself when it comes to asking questions. The world is full of great stories, and as a business reporter you have a wider mandate than almost anyone around. Set out to learn something new with every story you write, and dedicate yourself to passing that new knowledge along. An exercise I’d like you to analyze the story on the next page. What does it lack? What changes would you advise the reporter to make? Are there other stories that arise from this one? Jot down your thoughts on paper. If you are stumped or want to share your opinions, e-mail me at firstname.lastname@example.org. Five of the last Smith Electronics employees in Middleville lost their jobs today as the plant closed 24 years almost to the day after it opened. “It's an awful sad situation, and there's not much I can say,” said Bruce White who was the plant's manager and is now an engineering manager at Smith's corporate headquarters in Adams, Calif. “It's been a long time coming. We've known about it for two years, and the date is finally here.” The plant opened Aug. 17, 1981, and closed Aug. 19, 2005, White said. Gilda Pruitt, the plant's retired human resources manager who has continued to work for the company on a consulting basis, said two or three people would remain on Smith's payroll. One employee is in Mexico training Smith workers there, and another will be responsible for the keys to the plant and will be on call to open the facility when needed, she said. The approximately 126,000-square-foot plant on 113 acres in Wilson County will be put up for sale, White said. He said the plans are for the plant to be sold as soon as possible, but he did not know how much the company would be asking for the property or which real estate agency they would use. Mrs. Pruitt said many of the company's employees were generous with their time, and the company contributed to many local charities such as United Way of Wilson County and Communities-In-Schools of Wilson County. Continued . . . “Smith had engineers that went out to our programs and talked to the kids to help them decide what career would be good for them to go into,” said Karen Folk, project director for Communities-In-Schools of Wilson County. Tom Hassell, who has been president and chief executive officer of United Way of Wilson County since 1993, said Smith always been a “good supporter” that ran “strong” annual campaign drives for donations. “The people at Smith were always good community citizens, and we're sorry to see them go,” Hassell said. “Since the late ‘90s, the manufacturing universe here in Wilson County is a lot different. We've been fortunate that donations from the schools and new businesses like the Wal-Mart distribution center have been able to offset some of the losses.” The Smith plant has manufactured multilayer ceramic capacitors that are used in many electronics from telephones and televisions to washing machines, Mrs. Pruitt said. In the late 1990s at the height of the plant's operations, about 1,150 employees worked there. She said the layoffs are part of a plan of action the company developed years ago to transfer jobs to its lower- cost plant in Monterrey, Mexico. The average employee on the factory floor made about $13.50 an hour, Mrs. Pruitt said. She said 80 percent of Smith employees were female, and that was because women usually had smaller hands than men and greater finger dexterity needed for work with capacitors. Moving along . . . There are plenty of other topics you might find useful as a business reporter. Let’s examine them. Arrrggg – jargon! There is nothing that reduces the vitality of business stories more than jargon. Unfortunately, it is an occupational hazard. Our sources have their own languages. Stock analysts talk about “blue-chip stocks” and “profit-taking.” Human resource folks use phrases like “thinking outside the box.” CEOs drop words like “partnering” and “market-driven” in interviews about the company’s direction. The language of business is constantly shifting, as anyone who has spent any time around HR people can attest. (“Teeing up” was popular with them for a long time; recent buzz phrases include “drill down,” “principle centered,” “silos” and “Sarbox,” short for the Sarbanes-Oxley Act.) Jargon thrives for a reason. It is a form of shorthand for business people (indeed, specialists of all kinds, including journalists.) It is a way to evoke and convey meanings with a minimum of explanation. Jargon has a creative aspect. Consider these, courtesy of a site called the BuzzWord Compliant Dictionary: air cover: Borrowed from the military, it's when someone in upper management agrees to take the flak for an unpopular decision -- while you do the dirty work. "The CIO will provide air cover while you make the cuts to reduce costs." matrixed environment: A supposedly efficient organizational structure where workers answer to a functional department head, but most of their work is assigned and managed by a project manager from a different area. Or these: Scooby snacks: Token compensation, generally nonmonetary, given as an award. "All we got for pulling that project out the fire was Scooby snacks – two ‘extra’ casual days." shortfalls in compliance: Failure to adhere to proper procedures – i.e., broken rules. megadigm: A profound change. Coined by change management experts (replacing the less impressive-sounding “paradigm shift”) to describe growing customer expectations that managers can no longer ignore. And my personal favorite: enrollment deductions: Known on Earth as layoffs. This Orwellian phrase debuted a few years ago in a Procter & Gamble press release announcing the elimination of 6,000 jobs as a result of P&G’s takeover of Gillette. There are two problems with jargon. First, because it is shorthand, it requires that everyone understand the intended meaning. Calling something “a new paradigm” conveys meaning to those in the know, but nothing to most people. Jargon, in other words, excludes people. Second, it can blunt meanings. Look at the evolution of words and phrases used to describe job cuts. “Rightsizing” is a positive- sounding version of “reduction in force,” which was a more sterile way of saying “layoffs,” which was itself a less onerous way of saying “firings.” What’s this have to do with us? You’re probably saying to yourself, “I don’t use jargon in my stories.” Well, maybe you don’t use the most egregious forms of it, but you probably use some. Consider “blue-chip,” which you can find in stock-market stories every day. It is jargon for top- quality, and therefore more costly, shares. (The origin is poker, where the blue chips are worth $10.) The phrase is used so often that it’s assumed everyone understands it, but most people don’t. It is jargon. When in doubt, explain The best way to root out jargon is to get ruthless with yourself. Read every story closely. Are there words and phrases you’ve used that you can’t fully explain? Better yet, would the average reader be able understand exactly what you mean by them? As you may suspect by now, there is a thin line between jargon and cliché. To help differentiate them, let’s look at some definitions: Jargon – 1. Language that is used or understood only by a select group of people. 2. Speech comprised largely of nonsense words. Cliché – 1. An overused phrase or expression. 2. An expression so often used that its original power has been drained away, such as "dead as a doornail." Here are just a few examples of what you should avoid: Bargaining chip Big-ticket Consumer mindset Cutting-edge Eleventh-hour Fast track Mission statement No-holds-barred Revenue enhancement Revenue stream State of the art Trickle down Cliches are expressions used so often that they have become almost invisible. The first person to write “At the end of the day, all that matters in business is success” was expressing a thought in a novel way; the 86 million or so who used “at the end of the day” in subsequent stories were merely copying. Think about it when you’re writing or editing your next story. How many expressions in it have you seen before? Some of the most cliched business writing involves the stock market. Reporters covering Wall Street (a description that itself is both jargon and cliche) often write prose like this: “Wall Street took a battering Friday as profit-taking combined with spurting oil prices to drive the Dow industrials into the year’s cellar. It was a particularly turbulent day for airline stocks.” Such writing dulls the reader’s senses. Repetition of a phrase diminishes its power to move, impress or inform. It is elevator music. Try to find a plain-language alternative. Better yet, come up with a fresh new way of saying the same thing – something that will surprise people. Push for clarity It’s not unusual to be stumped during an interview. If an executive uses jargon that you can’t explain on your own, ask him or her to elaborate. That accomplishes two things: It helps you explain the meaning to the reader, and it increases the dialogue between you and the subject. Unchecked jargon can be laughable, like this quote from USA Today, usually a model of clarity: “In private, the bottom line is that everybody is keen to generate the killer combos of applications (of bandwidth) to fill those pipes. Just how much of a glut develops depends on how aggressively carriers light fiber.” A veteran’s view Not long ago Allan Sloan, a Newsweek editor, wrote a piece for the Reynolds Center Web site that summed up the situation beautifully: One of the biggest problems in business journalism is that all too often, we forget how to use the English language. Many of us who speak clear, coherent English in our private lives start spewing gibberish and jargon when we compose articles or scripts or columns. We're adopting the language of our sources, who want to sugarcoat unpleasant things like investors losing money, corporations being taken over and people getting fired. But sugarcoating isn't our job. Telling our audience the truth is. So take out the euphemistic trash, please, and use English. The meaning of it all As I’ve mentioned, these tutorials will touch a wide variety of topics essential to business writing, including financial terms. I thought it would be useful to look at just a few terms now. Revenue: The amount of money a company generates through the sale of goods and services and other sources. Reporters often refer to this as sales, but that’s not necessarily correct. Sales refers to cash receipts from products or services; revenue includes sales, income from interest, and other money, including cash receipts from rentals. Profit: This is what a company has left after all of its expenses are paid. It’s usually called income, and there are two kinds: • Operating income, which is the profit produced strictly from the company’s operations and doesn’t include non-recurring gains. This is usually considered the best way to judge the health of financial companies such as banks. • Net income, which is the true bottom line. It includes interest, investment income, depreciation and taxes. For manufacturers and retailers, this is considered the best measure of profitability. EBITDA: You’ll see this a lot in financial statements. Pronounced “eh- BIT-da,” this is earnings before interest, taxes, depreciation and amortization. Also known as operating cash flow, EBITDA is the cost of sales and operating expenses subtracted from revenues. Depreciation and amortization expenses aren't included in the costs. It’s considered is a useful measure of cash flow for companies that have low earnings because of large restructuring, expansion or acquisition costs. Profit margin: This is the measure of profit as a percentage of revenue. If Gannett makes $28 for every $100 of revenue, its margin is 28 percent. The value of a company’s margin is chiefly how it compares – both to its previous performance and to the industry in which the company does business. Return on investment: ROI is a way of stating financial results over a given period. If you invest $1,000 with a mutual fund company and a year later it’s worth $1,200, the ROI is 20 percent. APR: Familiar to all of us who have actually read our credit card contracts. Annual percentage rate is the interest on a loan expressed over one year, even if the loan is for a different period. It allows for easier comparison of loan rates. Fiscal year: Be careful to note whether a company keeps to a fiscal year or a calendar year. It’s the company’s choice, though industries tend to stick together. Retailers, for instance, usually end their years on Jan. 31 to reflect holiday sales. Capital: This refers to the money a business raises in the form of stock equity, venture capital or debt and which is used to do business. It’s different from working capital, which is money that can quickly be tapped for day-to-day operations. Tip: Note changes in a company’s working capital; a big drop can signify financial trouble. We could go on like this, but I have a better suggestion. If you think you need some help in understanding business and accounting terms, invest a few bucks and buy Investing for Dummies and Personal Finance for Dummies, both by financial consultant Eric Tyson. Despite their regrettably insulting names, the “Dummies” books are excellent places to develop your skills. These two cover a good deal of useful ground and, contrary to their names, are serious books. Producing great work We’ve covered quite a bit of ground. Let’s look now at some of the craft that goes into producing strong business journalism. Good stories are the product of a prepared reporter and are seldom achieved by chance. Before the first reporting takes place, it’s important to gather as much string as possible, including: • Company history. If you don’t have it, ask the media people; chances are they’ll have plenty of background to provide. • Executives’ backgrounds. Ditto. Make it a point to know the personal histories of the company’s decision-makers, including where they got their starts. Google them, too. Story preparations More background: • SEC documents if it’s a public company. Look carefully at the 10k, which contains detailed descriptions of the business and its challenges, as well as executive compensation and litigation. (You’ll learn more about filings in later tutorials.) • Regulatory status. If you’re profiling a brokerage, check the NASD for disciplinary actions (www.nasdbrokercheck.com). If the company is a manufacturer, check with both the EPA and OSHA to determine its record on worker safety and the environment. • Lawsuits. Check the local courthouse, or better yet cast a wide net by using Public Access to Court Electronic Records (www.pace.psc.uscourts.gov), the national court-records clearinghouse. The interviews Thus prepared, it’s time to start interviews. If it’s an in-depth profile, you should talk to as many top executives of the company as possible. Don’t forget the rank-and-file, too; they often will give you great insight into the character of the workplace. Who else? • Competitors. They’re a rich source of material, especially if the competition is sharp. • Suppliers. They’re often not terribly helpful – except when there’s a bankruptcy involved, in which case you may get an earful. The interviews • Analysts, if it’s a public company. It’s getting harder to speak directly with analysts because of the crackdown on stock-touting, but their research reports are usually available. Talk to the broker’s handlers in media relations; they send you the reports and sometimes clear the broker to talk. • Academics. If you’re looking for an outside perspective on a company’s competitive situation, especially when economic issues are involved, academics can be helpful. One good place to start is ProfNet.com, where you can troll for experts in a multitude of fields. The art of the interview Interviewing is a crucial skill in all beats, but nowhere is it more important than in business. Business interviews can be tough, and for several reasons. First, many executives are data-driven. That is, they will talk at some length about their products and their markets, but are loath to expand much on their feelings. Second, most want you to write about their companies, not about them. Third, distrust of the media is not uncommon in their world. The art of the interview Here are four improvements that most of us can make to our interviewing skills. . . The art of the interview 1. Shut up and listen. Far too many reporters have a compulsion to help the subject answer what has just been asked, especially if the interviewee seems slow in formulating an answer. Don’t do that. Silence is uncomfortable for the executive, so let him or her stew a little. You might get a completely unexpected answer that reveals a lot. The art of the interview 2. Never say no for someone else. In other words, don’t censor yourself. If a question needs to be asked – why were you fired from your last job? – go ahead and ask it, albeit politely. Too many of us fear that the subject will become angry. So be it. That’s a revealing reaction. Besides, they can’t kill you; they can’t even hit you. The art of the interview 3. Be observant. What’s that certificate on the CEO’s wall say? What the lapel pin mean? How come all the cubicles in the office are bright red? Even more significant, why do so many of the workers seem so young? Why are there so few women and minorities? Use your eyes, and your nose and ears too. What does it sound like in a steel foundry? The art of the interview 4. Remember to ask followups. Too often we accept a person’s response on its face without asking, “Why?” That’s among the most powerful and open-ended of questions, and it can produce thoughtful and intriguing answers. Never assume you know what an answer means. If there’s any doubt in your mind, ask for clarification. The lessons If you are new to business matters, don’t be discouraged by what you don’t know. Most successful business writers have been in the same boat. Broaden your knowledge. Read as much great business coverage as you can. Talk to your colleagues and learn from them. Never, ever be reluctant to ask a question. And stay curious – about writing, about topics, and most of all about people. That’s the surest path to success.
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