The good news: perceptions are slowly changing and there is money available for solid, high-growth firms that can adequately communicate their promise to investors. If you are female, grow some thick skin and deal with the stereotypes early on in your conversations. Here are a few:
• Woman entrepreneurs do not want to grow their business as quickly as men do.
• Female entrepreneurs just don’t ‘get’ how to source funding.
• Lack of networks is one reason for women’s challenges. When women were asked about their networks, they listed various men’s names. When those men were asked about their networks, they did not mention the women.
Before you write to your local newspaper to complain about the above list, take a breath. Let's go to the facts to verify these issues. What is true are the statistics on male- versus female-run businesses which illustrate that female companies may grow at a slower clip, but they tend to have a higher survival rate.
Understand that, when it comes to accessing private equity, Fund Managers favour the growth versus survival factor. It’s only logical that when you go about raising capital, your pitch must be at growing the business, otherwise leave private equity to the more aggressive CEOs. Keep on doing your slow growth but do not expect private equity investors to invest.
Barbara Orser, professor at Carlton, reiterates that critical point, “Here’s the bottom line for women: only entrepreneurs who start robust, high-potential businesses - and communicate that promise - will get the money they need.” Smart women understand that thinking, and reassure investors by spending more time on illustrating their ambition when reaching out to the VCs.
"General Motors is a monster company employing a quarter million people worldwide. It sells $150 billion in cars – or at least it used to. It is not just a producer of vehicles. It is also a supplier. It has been through several joint ventures and has owned a number of foreign manufacturers, Isuzu and Opel being but two. In short, the company is a very big player, financially, economically and politically. Yet, somehow you get the impression that many in the financial media think we could just turn the lights out and go home. This is just not the best option." Watch Edward explain this further:
Jacoline Loewen is a partner at Loewen & Partners, private equity for companies over $10M in revenue.
In these economic times, your private equity partners will advise you to forget the fads and get back to basics. With all of the latest and greatest concepts webcasts, podcasts and blogs vying for your attention, you would think that growing your business was as complicated as building the space shuttle. The fact is, there are only three ways to expand business...
Option #1 – Increase the number of customers
You increase the number of customers you have by reaching new customers with your existing offering or developing a new offering. Ideally you will leverage the offering you have to enter a new market or expand the reach in your exisiting market. Three key questions to answer to increase the number of customers are:
Who has a real need for the product/service I’m selling? Does my product meet that need in a manner that either saves money or provides additional value?
How much, if anything, are they spending to address that need today?
How many of those potential customers are there? How do I reach them?
Answering these questions meaningfully necessitates market research. Market research is like eating your broccoli – the idea is not appealing but it does the right job in keeping you healthy. Research teaches you a great deal about what you will need to know to effectively reach these new customers such as what to say, how to say it and to whom.
For example, in my industry which is finance and involves investing in companies, many of the big players have had a brick smashed to their heads. Private equity and venture capital funds are in bad shape. The market research done by the top funds and consulting firms like McKinsey and Company show that funds invested in smaller companies are faring better and enjoying higher returns. With this information, many or the funds are now looking for smaller companies. Reducing their size of company as a potential client opens up the customer pool.
Could you reduce one of your criteria to include a whole new category of client?
Option #2 – Increase the frequency of purchase
The shampoo companies used the wash, rinse, repeat mantra. This ordered their customers to use double the shampoo that is actually required. How many times have you washed your hair twice?
The quickest path to increasing the frequency of purchases is by making it as easy as possible for your existing customers to do business with you repeatedly. Another way to look at this is providing additional customer value – and ultimately building customer loyalty. If you make it easier for customers to buy from you, relative to your competition, then you will continue to win their business. This, of course, assumes your products or services are comparable or superior to your competitors.
Outside of customer loyalty programs, here are a few areas to consider improving:
- Responsiveness to requests, phone calls, emails
- Accessibility to the customer’s primary contact
- Consistency in offering
- Simple contract and pricing
- Bite-sized projects
- Follow-up and follow-through on meetings
- Accurate and timely billing.
While these may seem like common sense, consider how many vendors you no longer use because they were too difficult to do business with. Don’t become one of them to your customers. Option #3 – Increase the number of units sold
By default you will increase the number of units sold when you increase the number of clients and frequency of purchase. But you can also increase the number of units sold by understanding how to add value. If you want to sell more products or bill more hours, providing a value-add benefit or solution will begin to strengthen your customer relationship. If you are to consistently add-value to the customer relationship, you need to fully understand how your customers interpret, define, and quantify the value they receive from your products and services.
Here is a consumer example: A restaurateur offered existing customers 20 percent off for parties of 4 during lunch and early dinner. The idea was to add value to her existing clients by providing them with a benefit they could share. Result: Her lunch business went up by 88% in one month and by 53% over the campaign. On the frequency side, she experienced 71% retention of her customers when she dropped the campaign after 3 months.
Finally, don’t forget, to see real results, private equity will remind you to start with what you already know about your customers. It is the market research, customer knowledge you already have, that is literally a hidden goldmine of profit that can grow your business and increase your company's top line. It is this customer-focused information that will provide the foundation for generating more sales, retaining and cross-selling customers, and acquiring new customer business. Armed with customer-focused information, you will know which is the best way to grow your business.
Jacoline Loewen assists companies in raising capital and can be reached at www.loewenpartners.com. She is the author of Money Magnet:How to attract investors to your business (http://www.moneymagentbook.ca).
Already, companies are beginning to link with private equity which is a new type of money which came on board within the last decade for small and mid sized companies. The banks have had a massive slap down and will be risk adverse for the next economic cycle at least. This leaves private equity to fill the role of higher risk lender or partner. By the way, if you are a business owner,do understand that Private equity is a misnomer as it also includes debt.
Listen to this podcast from Business Week on the money private equity is beginning to spend. You will understand why optimism about the economy is beginning to grow and private equity will play a large role.
View Private Equity Stimulus Package.
Jacoline Loewen is a contributer to Trusted Advisors' Survivial Kit and a partner with Loewen & Partners.
Ezra opens by describing his own situation as the owner of a business accused of human rights abuse but, to his credit, quickly puts that aside and tackles a full blown investigation of the HRC cases – a human rights audit if you like. Even if he has cherry-picked the vexatious cases, there are too many, and I was particularly disturbed by the cash payment rulings against small business owners. Ask any tax accountant, most small business owners do not have a great deal of cash and often go without a monthly salary or contribution to a pension just to keep going – unlike HRC agents with their salary (many over $100,000), indexed pensions and benefits.
Using his education in law, Ezra unpacks case after case illustrating the imbalance between the person making the human right’s complaint and the business owner. The complainant gets a lawyer (funded by tax payers), does not need to face the business owner they are accusing, may get a cash payment ($50,000 has been paid), may get a written apology even published in the paper.
Now, when was the last time you saw an embezzler’s letter of apology to a business owner in the newspaper?
If the complainant’s case is dismissed, they are not required to cover the costs to the business owner as a real court case dismissal would require. It gets worse: the HRC can enter your work and home, seize any property they want without a warrant – good Lord, is this Zimbabwe?
For all of us non-lawyers, Ezra illustrates how hundreds of years of legal framework and code of conduct gets swept aside by these HRC agents pursuing frivoulous complaints. Is there not enough salt in the soup at your company’s canteen? Gee, file a human rights complaint to your local HRC and you could end up with some cash.
I wondered if the HRC had industrial relations or business expertise. Ezra fills us in. The head of the BC HRC’s education is nursing. Well, that explains it. She’s got Head Matron Syndrome: she thinks she’s thundering down sterilized, scrubbed halls of a hospital, patients tucked meekly between starched sheets, nurses and orderlies all bowing their heads obediently in fear. That head nurse has real power – that’s for sure.
The deadliest part of Ezra Levant’s book is his description of his own interrogation. The HRC government agent does not have the slightest clue about the damage she is inflicting on a business owner or on the future well-being of our society. She does not realize how these claims will tarnish the very good work done by so many government employees.
As Mark Steyn explains in the foreword, “Go to YouTube and look at the videos of Ezra Levant’s interrogation, you will not find some jackbooted thug prowling a torture chamber but a dull bureaucrat asking soft spoken questions in a boring office. Nevertheless, she is engaged in a totalitarian act.”
Of course, I would not want to call that HRC agent a “Loser” for fear of hurting her feelings. Then she could complain her human rights were abused and I will be dragged through five years of court proceedings, fined and forced to write a letter of apology printed on the pages here in The Women’s Post.
As these crazy Human Rights case rulings become public with the help of Ezra, the repercussions for our business community will be chilling. These human rights cases make entrepreneurs feel angry and downtrodden. Why take the risk, stress and responsibility to run a restaurant or hairdressing salon when you can get slapped with a human rights case that can cost you your business? Heck, let’s all become government employees because as Ezra Levant makes very clear in his book, Shakedown, just like Rodney Dangerfield, business owners don’t get no respect.
These company executives apparently did not have much faith in their own firm and yet, they expected the US taxpayer to effectively own them - hmm...
So where are bailouts going? I hope the American people can demand answers.
If a private equity fund was asked to invest in such a company and they didn't see the same commitment from the senior executives, why should they put in money? The US taxpayers should ask the very same question or rather, the US government, on behalf of the US taxpayers.
Yet another example of the difference between private equity fund boards and public market boards. When you are putting in your own money, you want clear answers and results.
Investments could be your Uncle Jim’s $1M he put into your brother’s video gaming company. This is private, it is not listed on the public market where the shares can be bought and sold by anyone. This definition, however, omits the key difference that sets private equity far apart from alternate capital.
One of the leading private equity players, David Rubenstein of The Carlyle Group, gets to the nub. “Private equity is the effort made by individuals with a stake in a business.”[i] These individuals will put capital in, try to improve the business, make it grow, and, ultimately, sell their stake.
Jacoline Loewen is a partner with Loewen & Partners which has raised over $100M for owners of companies.
[i] Rubenstein’s definition sourced from the website www.bigthink.com/business-economics/6380>.
It is only in the last decade that this type of money has now become available in all sorts of formats for business owners of mid-sized companies. These stories do tend to fly under the media radar.
This is why Loewen & Partners runs CEO Round tables with Ivey Business School to showcase private equity. Yesterday, we had McKinsey and Company and Bill Wignall giving detailed presentations to a room of business owners. Here is the take away from Paul Hogendoorn, owner of OES.
"It’s both a professional benefit and a pleasure to attend your CEO events. Yesterday was no different. (BTW, my most recent column again referenced a key take-away from a previous event).
My big take-aways from this last one were:
- It’s OK not to need PE money
- Know specifically what you want to use any investor PE money for
- The structure of a deal can make even an otherwise unattractive deal workable
Ken enjoyed it to. Much of the first presentation was greek to him (and therefore intimidating – which was consistent with my first experienced a couple years ago), but he recognized the value in gaining some exposure to it, and he really enjoyed the second speaker."
The second speaker was a professional manager, Bill Wignall, who gave his experience in accessing Angel, Venture Capital and Private Equity Fund money. It was a great day and it is always gratifying to see that you are helping business owners.
I can say this because in my experience, I have often been astonished at which businesses are liked and coveted by investors—yes, even those that are not currently profitable.
McGregor Socks, a long serving Canadian company is such a case. After struggling to adapt to the fast changing global market, McGregor knew it needed to add China as a destination for knitting up Canadian-designed creations. It was a private equity fund that put up the money since they already had experience in China. Bringing in partners is a difficult transition but with supportive investors, an excellent Canadian brand continues to fill store shelves (look for a pair of McGregor’s the next time you need socks).
Jacoline Loewen is a contributing author to Peter Merrick's book, The Trusted Advisor's Survival Handbook.
I just finished reading Money Magnet. Thank you for writing/recommending it! The information you shared will save me a lot of time instead of reinventing the wheel. I like reading materials from people like you who can share specific industry insight (eg. when you described what VC Rick wants to see in slides). Some of my key takeaways include but are not limited to the following:
- Targeting qualified investors based on their mathematical fit and specifically asking them to clarify their full criteria
- How to be investor ready/the legacy investor concept.
- An investors’ protection/clauses (ensuring that I negotiate unnecessary ones).
- Knowing common pitfalls/key criteria investors like
- Ensuring that I answer the 4 investor-ready questions and
- Investor-friendly methods of structuring a presentation
These translate into five key questions that directors should pose to senior management and expect a thoughtful analysis in response. If you are a Board Member, take note and try asking them at your next Board meeting:
1. Have we left too much cash on our balance sheet instead of raising our cash dividends or buying back our own shares?
2. Do we have the optimal capital structure with the lowest weighted after-tax cost of total capital, including debt and equity?
3. Do we have an operating plan that will significantly increase shareholder value, with specific metrics to monitor performance?
4. Are the compensation rewards for our top executives tied closely enough to increases in shareholder value, with real penalties for nonperformance?
5. Have our board members dedicated enough time and do they have sufficient industry expertise and financial incentive to maximize shareholder value?
Jacoline Loewen is a partner with Loewen & Partners and has been a Board Member for Bilingo China, Innovation Exchange, The Women's Post, Strategic Leadership Forum and more.
The trouble is that government borrowing risks crowding out private investment, driving up interest rates and potentially slowing a recovery still trying to take hold. That is why the American Federal Reserve announced an extraordinary policy this year to buy back existing long-term debt — $300 billion over six months — to drive down yields. The strategy worked for a while, but now the impact of that decision appears to be wearing off as long-term interest rates tick up again.
Then there is the concern that the interest the government must pay on its debt obligations may hurt future generations. The Congressional Budget Office expects interest payments to more than quadruple in the next decade as Washington borrows and spends, to $806 billion by 2019 from $172 billion next year.
GRAHAM BOWLEY and JACK HEALY report in the Wall Street Journal, May 3, 2009: “You’re just paying more and more interest and having to borrow more and more money to pay the interest,” said Charles S. Konigsberg, chief budget counsel for the Concord Coalition, which advocates lower deficits. “It diverts a tremendous amount of resources, of taxpayer dollars.”
Of course, no one is suggesting the United States will have problems paying the interest on its debt. On Wednesday, even as it announced its huge financing needs for the latest quarter, the Treasury said financial markets could accommodate the flood of new bonds. “We feel confident that we can address these large borrowing needs,” said Karthik Ramanathan, the Treasury’s acting assistant secretary for financial markets.
One worry, however, is that there are fewer eager lenders to buy all that American debt. Most of the world is in recession, and other nations have rising borrowing needs as well. As other nations’ surpluses turn to deficits, America will face competition in global financial markets for its borrowing needs. For the moment, the United States is actually benefiting from a flight to quality into Treasuries brought on by the global financial crisis, which helped reduce rates to record lows this winter. But the influx will not continue forever.
China has lent immense sums to the United States — about two-thirds of its central bank’s $1.95 trillion in foreign reserves is believed to be in United States securities — but it has begun to voice concerns about America’s financial health.
To calm nerves and fill the deficit hole, the government is getting creative. The Treasury is ramping up its auction calendar, holding more frequent sales of government debt and selling the debt in expanded amounts. It is now holding sales of its 30-year bond each month, up from four times annually.It is also resuscitating previously discontinued bonds, such as the seven-year note and the three-year note, to try to mop up any available money all along the yield curve. There is even talk of issuing billions of dollars of a new 50-year bond, though the idea has not won official approval