Ugh, you say, accounting: bean counters and all that. Boring. That’s what I thought too, during my early adulthood, before taking some classes and learning how creative accounting can be.

And dangerous too. I can tell you some stories about bad accounting being bad business. In fact, I will, and on this blog. But first, this note.

Jason Mendelson titled his guest post on VentureBeat: FAS 157 is stupid:

Simply put, FAS 157 says that one must value investments at “fair market value.”

I object because it’s not possible to “fairly value” a private, early-stage portfolio the way that FAS 157 wants us to. This process injects a ton of false precision and costs and benefits neither the venture firm, nor its investors.

Prior to FAS 157, we would carry our investments at cost until such time that the company was: A) funded by a third-party and marked to the new cost; B) funded by insiders and marked down if the valuation decreased; or C) marked down due to poor performance. In none of these cases could I, at my own discretion, mark up one of my investments. Also, this was primarily a market driven approach, whereby we let the private funding market determine the value of the investment.

I’m just hoping Jason’s misinterpreting, because that sounds disastrous. But no, apparently not. FAS (sometimes called FASB, Financial Accounting Standards Board) apparently finalized this rule in 2007 and decreed it in effect last November. And poking around the Web, I find, to my dismay, a lot of people interpreting this like Jason does. Including the New York Times, CFO.com, and a lot of others. This is bad news.

So here’s a case that comes up all the time in business planning; it’s a common question I get from readers and customers: “How do I get my financials to show the real value of my business?” That comes with the explanation that some land or building or widget the person owns is “really” worth way more than what they paid for it. So the books are off. They say.

And every time I get those questions, or at least until this FAS 157 problem, I’ve been very comfortable answering:

“No, you don’t change that. There needs to be a backbone to financials. Things are worth what you paid for them, not what you think you can get for them. Tell your people that your business is worth more than its book value, and that’s fine; many businesses are. But don’t change your books.”

And I hope you can see why, particularly these days, when a lot of assets are worth less than we thought. Sticking to actual transactions, recorded amounts, makes so much sense. Your land and buildings stay on your books at the value you paid for them. Period. They are not worth more until you sell them, and, at that point, you get the profit.

Can you see the wisdom in that? Anchoring the financials to actual transactions? Because if people start revaluing assets willy-nilly, then all kinds of bad things happen:

• Do they pay taxes on the profits that appear like magic when an asset’s book value increases?
• How does anybody read a balance sheet? Do you discount for the optimism of the accountant who determined the “fair market value?”
• And the most unbreakable, revered rule in accounting, capital equals assets less liabilities, is suddenly all puffy and fuzzy; because now the assets’ worth are based on some subjective guess.

I’m sorry, but that sounds really bad to me.

I hope that this new rule will be applied reasonably. There is still that hope. I could see how “fair market value” could really be as simple as “when there’s been a transaction, reflect that in the value so your reporting to your stockholders is accurate.” So then it might apply to assets that have a legitimate easy measure of fair market value, like publicly traded stocks. But even there, those assets change every day; do we really want our company books to go up and down like the Dow Jones Industrials?

So I hope Jason’s wrong. But I looked at his bio. Seems like he knows his stuff.

There I was, browsing the Web last night, when I came upon a post titled Top Business Opportunities for a Down Economy on Diva Mogul. Sounds interesting, doesn't it? It did to me. So I clicked. And I got this:

John Assaraf and Murray Smith, the founders of OneCoach in San Diego, offer their 2009 business advice. Here are a few industries, they say, will take off this year:

1. Business Coaching – Out go the jobs, enter unemployed entrepreneurial minded people.

The list goes on from there. Alternative fuels, health care, discount retailers … luxury products (say, what? "The rich are only getting richer!" say John and Murray, though I don't think so … but that's off point). IT services. Credit and debt management (no surprise with that one, number 10 on the list).

I have nothing against John or Murray. I don't know them. I assume they're good coaches.

Maybe they're right. Maybe they are even generously inviting others to join them in a good business, sharing the supposed wealth. But even so, it's a classic credibility killer. Don't list your own business as the hottest there is. Make it number four or five maybe, in your list of 10. At least.

I had coffee yesterday with a man locked in a battle to the death with his startup. Lack of sleep, lack of exercise; it worried me. I’m sure I’ve been there a number of times myself during my years in business, and that’s precisely when I needed some advice, like the advice I offer today.

As you develop your startup take the time to define success, whether you explicitly state it in your business plan or not (and probably not, given what a plan is). What’s important to you? Is  your business the only thing, or is your business a means to an end. Does having your own business mean you don’t have a family, or a vacation, or other things that are important to you?

Put some measurements of success somewhere so that you’ll be able to access them from time to time, as business grows, problems arise, and time goes on. Does having your own business mean you can coach the kids’ soccer team, and attend parent-teacher conferences? Does it mean a couple weeks skiing every winter?

I often talk about getting general agreements between partners and co-founders in writing. Usually people think that’s a matter of buy-sell agreements and dissolution of partnerships and such, but that’s not all. If you haven’t done this yet, do it. Define your success.

Sure, that definition might change at some point, lots of things change. At least you should have your definition of success available so you can review and mark the change. Reminders are good.

I like to talk about passion in startups. I do believe that your chances are much better if you work your startup around something you want to do. Better yet, work your startup around something you believe in. On that one, happily, it’s not only do as I say, it’s also do as I’ve done, because my startups have all been related to work I liked to do (business planning) and believed in (software).

Still, life is short. Your life is about life, not startups. Sure, we’ve all done the overnighters in crunch times, but don’t lose track of what’s really important. Business is what we do, not who we are. If you have a family, get home for dinner, and if you have to, you can work after dinner on your computer at home. Coach soccer. Work out.

Don’t let startup passion spoil the rest of your life.

(adapted with permission from Up and Running)

Now that the election is over, I can publish this post. Before today it would have been too easy to interpret it as an electioneering post — not that I didn't have my opinions, and not that I wasn't sharing them, but this one isn't actually about the vote, it's about a lesson embedded in the discussion.

I liked Image vs. Hard Work last week on MommyCEO. The trigger was the political discussion of Sarah Palin's wardrobe, but Sabrina makes a business-related point. This is good to consider:

Without getting into the political side of things and discussing whether that sort of spending is appropriate in any campaign, let’s discuss the idea of image in the workplace and whether the right clothes, the right accessories, and the right hair and makeup really do lead to better careers. Nataly from Work It Mom has a great post on this topic. She reminds women that, unfortunately, appearance matters. It is not all about hard work and smarts. Unfortunately image plays a big part in your potential success.

I tend to agree – to a point. I think it is important to understand that people judge. They always have and always will. If you don’t look professional, people will judge you. That being said — I think that you also have to embrace who you are, what your company does, and where you come from. Think about Mario Batali and his trademark orange Crocs. If you are running a high-tech company, vs. a financial-services company, your wardrobe will be different. As the CEO of a high-tech company, I know that I can get away with being a little less formal – in certain situations.

As a man who used to wear bell-bottoms, and who once had hair down below the shoulders, who has always hated the proverbial coat and tie, I know what she means. It's silly to fight it. Clothes aren't important, but if you try to make that statement by dressing down in business situations, you make them more important, not less.

I think I learned a good lesson from Bruce Stuart, of ChannelCorp, who shared the podium with me in a lot of computer channel partner meetings. They were usually held at resorts because that would increase attendance by channel partners, who were independent business owners selling the computers our clients manufactured. Bruce would always put on a white shirt and a dark suit to present. His audience was always dressed in shorts and sandals and t-shirts.

Bruce pointed out to me that we were the show, not the audience. And we talked about serious things like finance and planning. So we wore the suits.

And then there was the time I was heading off for a Silicon Valley business meeting, getting ready to drive to the airport near my home in Eugene, Oregon, to fly to San Francisco. My team members, picking me up to drive to the airport, sent me back into the house to change out of a suit and into my khaki pants and blue shirt. Times had changed, context had changed.

When dressing for somebody else works better, it's easy to do. Express yourself some other way.