Before buying a company of his own, Michael Kramer steered two businesses to successful buyouts, accumulating deep experience -- from the triumphant to the traumatic -- along the way. A master of the exit strategy explains how finance leaders can learn to thrive on panic.

Steve Player: When we first met, you had just joined Arthur Andersen. What led you to work there?
Michael Kramer: Andersen was an opportunity to see as much as possible in the shortest amount of time. I spent 4 years there and probably worked on 45 different projects over that period, so it was great exposure to a variety of industries and businesses in different kinds of circumstances.

I was in the operations consulting group. We worked mainly in the manufacturing and distribution industries on projects such as restructuring projects for clients with credit challenges, redesigning manufacturing floors, retail strategy projects ... a number of different things, and that's what was so appealing about the Andersen experience.

SP: What's your undergraduate degree in?
Kramer: I have an undergraduate degree in civil engineering from Georgia Tech and a master of science in structural engineering from Georgia Tech. I received my master's in business administration from the University of Texas in 1992.

SP: Coming out of an engineering background, how much work did you do in finance?
Kramer: Actually, very little. I was much more focused on clients' operations. Obviously, that's closely tied to finance. Some of the companies were in trouble, which is often measured by the finance departments, and many of our projects were initiated by CFOs. But those decisions and projects had implications for different parts of the organization, whether it was shipping, warehouse design, manufacturing, or sales strategy.

SP: I remember one project in particular that we worked on together for a home improvement company ...
Kramer: They had sales all over the country, and they were trying to manage their leads. The challenge was always in trying to make quarterly income numbers. Management would wake up in the middle of the quarter and realize that they were not going to make it, and then they would try to invest a lot of money really quickly to turn it around, but inevitably it didn't work out.

That was a corporation driven largely by salespeople. Those guys tend to be eternal optimists, and finance was always behind the eight ball trying to hit the numbers that they had already communicated. It's important to be a realist when you're working with projections and salespeople. Often, I found, the CFO is the guy who's communicating to the owners, the industry, and the marketplace what's going to happen, even though they're not his numbers. You have to have a really good understanding of your numbers, the credibility of those numbers, and where they come from, before you share them with others.

SP: I remember that this project resulted in what I call a predictive logic diagram, which shows what you have to do in order to make revenue happen.
Kramer: Yes, we backed it all the way up to how many calls the call center had to connect each night in order to set up leads for a salesman the next day. If they didn't make 44 calls the day before or two days before the guy was supposed to be on that route, they couldn't hit their goal no matter what happened, based on their experience.

SP: In these tough times, people are starting to understand that the velocity of the cash cycle is critical. It's really important to understand how much time it takes from when you invest a dollar to when you see that dollar coming back in ...
Kramer: Right. And obviously what's happening in the marketplace is that folks are shelving projects with a longer cash cycle.