Surprise - Government stimulus can reduce private sector spending

If you are wondering if your tax dollars can re-build the economy, I recommend reading more about this fascinating study by HBS which confirms that government spending skews opportunities for private businesses.  I like it when we can separate out the social rhetoric and see the economic factors clearly, particularly with well-meaning government interventions. Central planning has been shown to be far less effective in the many political forms it has tried over the past century.  If you are running your own business and having to meet payroll, you will already be aware of these findings even thought the researcher, Joshua Coval, was surprised.

Executive Summary:

New research from Harvard Business School suggests that federal spending in states appears to cause local businesses to cut back rather than grow. Read the full article here - A conversation with Joshua Coval.
Key concepts include:

• The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three congressional committees. In the House, the average is around 20 percent.
• For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.
• In the year that follows a congressman's ascendancy, the average firm in his state cuts back capital expenditures by roughly 15 percent.
• There is some evidence that firms scale back their employment and experience a decline in sales growth.

Robin Hood Should Have Been in Private Equity

I saw Robin Hood this long weekend. It is a truly, extraordinarily bad film: long, boring and yet, at times, preposterously silly. The low point came towards the end, when a bloodied, chainmailed Robin lept out of the English Channel, and gave a dramatic, slow motion roar. The whole audience burst out laughing. But it’s a real shame the film is so terrible, because it actually has quite a positive message about hard working people keeping the results of their work. This is the not the Robin Hood conjured up by those Dalton McGuinty tax advocates, who think confiscating bank and business profits will solve all the world’s problems. This Robin makes speeches about liberty, battles King John’s tax collectors, and even tries to force the King to sign an early version of Magna Carta. If the film hadn’t been so utterly charmless, I’d have been cheering him on. Robin could have been a private equity partner to Maid Marion, helping her seed her farm while thinking bigger about the long term view.

This version of the Robin Hood story made me think of Jean Baptiste Colbert’s famous quote: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”. King John, plainly, failed to master that art. Yet modern governments have become very good at it, taking up to half of what people earn without triggering a revolt, or even any serious resistance. The reason is that people today often pay their taxes without realizing it. Most is simply withheld by their employers (hopefully they get a slip seeing what was taken), while much of the rest is passed on to the taxman by retailers with GST and HST. I suspect a lot more people would be advocating low taxes if they had to actually reach into their pockets and pay them directly with cash. In this spirit, perhaps it is time for tax withholding to go. Private equity is increasingly coming under pressure in the USA to have their income from investments into companies taxed as a business owner, not as a capital investment. That is a whole other blog.

"Should Lady Gaga have most of her wealth taken from her and redistributed to artists who did not sell five top chart hitters last year?" Eeer...that seems awfully unfair and why prop up those who have not created their own market? Conrad Black used this example to talk about taxes in his column in The National Post. Worth reading. Go to NP.

Uncertainty created by government involvement.

I watched the movie 1984 which was filmed in 1984 by, interestingly enough, Richard Bransom. Virgin's movie company, Virgin Films, does a good job interpreting the dense book 1984, and had the soundtrack by stars on the Virgin Records list. Very interesting as the movie tries to capture the human psychological results when the big government gets so involved in the market and day-to-day life of its citizens. You can see a few of Richard Bransom's personal bug bears, but it is well worth watching to remind ourselves of how 1948 looked to those who had suffered through the rise of a government like Hitler's, and why other countries and people accepted Nazis for so long.
We are experiencing a rise in how much the government gets involved in the economy again, and I listen to many earnest 27 years olds who fervently believe their government work is critical. A recent study by the rational and dispassionate Harvard Business School shows that this belief, just like 1984's O'Brian's belief, is dangerously misguided. In fact, this Harvard study shows that government spending shuts down private sector activity.
I have certainly seen that government funding of NGOs and not-for-profits sucks up talented engineers and marketing people while the public sector struggles to find such skills.
Find the full article here.
Here is the researcher's comments on their insights which they did not even mean to study:

Q: Although you didn't intend to answer this question with the research, what does your team suspect are some of the causes that could explain why companies retrench when federal dollars come into their neighborhoods?

A: Some of the dollars directly supplant private-sector activity—they literally undertake projects the private sector was planning to do on its own. The Tennessee Valley Authority of 1933 is perhaps the most famous example of this.

Other dollars appear to indirectly crowd out private firms by hiring away employees and the like. For instance, our effects are strongest when unemployment is low and capacity utilization is high. But we suspect that a third and potentially quite strong effect is the uncertainty that is created by government involvement.

Q: These findings present something of a dilemma for public policymakers who believe that federal spending can stimulate private economic development. How would you suggest they approach the problem that federal dollars may actually cause private-sector retrenchment?

A: Our findings suggest that they should revisit their belief that federal spending can stimulate private economic development. It is important to note that our research ignores all costs associated with paying for the spending such as higher taxes or increased borrowing. From the perspective of the target state, the funds are essentially free, but clearly at the national level someone has to pay for stimulus spending. And in the absence of a positive private-sector response, it seems even more difficult to justify federal spending than otherwise.

Christopher J. Malloy is an assistant professor in the Finance unit at Harvard Business School.

• More Working Knowledge from Christopher J. Malloy
• 
  

  About the author of the HBR article

  Sean Silverthorne is the editor-in-chief of HBS Working Knowledge.

The risk to family business when bringing in a professional manager

Family-owned companies present special challenges to those who run them. The reason? They can be quirky, developing unique cultures and procedures as they grow and mature. 

That's fine, as long as they continue to be managed by people who are steeped in the traditions, or at least able to adapt to them. But what happens when a firm grows to a point that it must hire outside professional help to remain competitive? That can be a difficult task for all involved. Just ask Melanie Kau.

It was a spring morning early in May 2008 and Melanie Kau had just concluded a meeting with her buying team at Mobilia Interiors Inc., a family-owned retail chain specializing in imported designer furniture. Kau, the president of the Montreal-based company, usually enjoyed these meetings. Sourcing the products that filled Mobilia's stores had been one of her favourite tasks ever since she joined the firm in the mid-1980s. Today, however, she was feeling some regrets. Not the that the meeting had gone poorly. Kau had called her buying team together to begin discussing their plans for Mobilia's spring 2009 product line-up, and the talk had been quite rewarding. What bothered Kau came at the end. As she was gathering her papers, she glanced at her schedule. The next two weeks were packed solid -- and not with the important sourcing strategy sessions that she so enjoyed.

Kau sighed. As her company had grown, so had the complexity of the issues she was required to manage. Once, she could spend up to 50% of her time on buying activities, a key differentiator for Mobilia. In recent years, that figure had dwindled to 10%, crowded out by other commitments to operations, finance and human resources. Kau was determined to unclog her schedule so that she could concentrate on the parts of the business that mattered most to her. The question was, how? The most obvious answer would be to hire a dedicated operations executive, preferably one with experience at a large company. There would be a double benefit

to such a move. Not only would Kau be able to delegate some of her duties -- freeing up time to focus on purchasing and sourcing -- she would also be giving herself the opportunity to hire someone who could bring problem-solving skills and best practices to Mobilia. The trick would be finding and training the right candidate, someone who would have the requisite combination of experience and a willingness to work in a family-owned enterprise steeped in its own culture. That was a tall order and getting it right would mean the difference between success and failure.

Kau's father, Hans, founded Mobilia in 1959, launching it from a single boutique above a grocery store. He soon developed a reputation for innovative business practices, something that became ingrained in the company culture. In the 1980s, for instance, Mobilia became the first Canadian retailer to import affordable furniture covered in Italian leather, a luxury that had traditionally been available only to well-heeled shoppers. A decade later, it became a Canadian pioneer of the big-box format for furniture stores.

Mobilia's growth continued under Melanie Kau's leadership. In her first 10 years as president, starting in 1996, she quadrupled the company's sales and opened nine new stores, adding close to 180,000 square feet of showroom space in Montreal, Ottawa and Toronto. The accolades followed, with Kau earning a spot on Caldwell Partners' prestigious "Top 40 Under 40" annual list.

As Mobilia grew, Kau found herself frequently mulling over the idea of hiring an operations executive. But each time, she decided against it after an analysis of the situation. She had always found ways to manage her increasing workload, whether it be making meetings shorter, increasing the time between follow-up meetings or dividing work up amongst her team. By early 2008, however, the demands placed on Kau had simply become too much. Her workload had essentially doubled in the past eight years, and there was little left she could do to lighten the load. It was becoming increasingly apparent that she would have to bring in executive help, probably sooner rather than later.

The were several issues with this decision, however. For starters, a hire would be expensive, as a successful candidate would expect a six-figure salary -- money that would come straight off Mobilia's bottom line. Training a new executive would also take time. It would be weeks, even months, before Kau knew whether her investment was paying off. More significantly, Kau was reluctant to bring in a person who hadn't risen through Mobilia's ranks. Even though the firm was almost 50 years old, it was still a family business, and most of the senior employees had been promoted into their current positions. All were familiar with the company's history and unique culture. Any new executive that Kau might hire would need to be sensitive to that environment. Complicating matters, Kau would not be looking for someone who would merely act as a "caretaker" executive overseeing existing procedures. Kau wanted someone who could take an active role in remodelling Mobilia's systems and processes to make the company more efficient.

All told, Kau knew that bringing in a new person -- especially someone with new ideas about best practices -- would be difficult. Mobilia employees and managers would be asked to change the way they had been doing things. Making successful transitions would require much patience from everyone involved. Productivity would likely fall during the initial stages of the transition as employees shook off old habits and adapted to new procedures. There was also a risk that best practices introduced by a new executive wouldn't work at Mobilia, due to subtle differences between the company itself and the firms where the new best practices had been developed. Kau would have to trust the operations executive to make judgment calls about what was right for her firm.

Lastly, Kau was concerned that an outside executive coming into Mobilia, a fast-growing firm, would likely exhibit strong, entrepreneurial traits -- just the kind of person who might one day strike out their own and become a competitor. Kau wanted someone who would be loyal to Mobilia. Would she be able to find someone who was just "entrepreneurial enough?"

For all the challenges, the thought of hiring a veteran executive still appealed to Kau: She simply had too much work on here plate. Even if there were risks, Kau knew that the status quo was not acceptable. Something had to change. What she needed most was confidence in knowing that she would make the right decision.

THE EXPERT VIEW

By Jacoline Loewen,

Partner Loewen & Partners and author Money Magnet

Kau should be concerned about hiring an outside executive. Yet, if I were on her board, I'd be concerned that her time is skewed away from the sourcing of product -- Mobilia's competitive advantage -- which she does very well. Her effectiveness is weakened because of an operations bottleneck, which may cost Mobilia its hard-earned market position.

First, Kau ought to make it a practice to ask for advice from mentors, other business owners or even a regular advisory group. CEOs need networks of peers that they can access to discuss business challenges and explore solutions.

Second, Kau is concerned about paying a high salary to attract a top professional. She need not worry. The recession has put talent on the market. By offering a moderate salary to a mature professional, someone experienced in family business, along with the opportunity to buy a stake in the company, Kau can preserve cash flow. If the executive is good, Mobilia's profit margin will improve, thus increasing the value of the executive's equity.

Finally, one of the characteristics I consider when assessing the strength of a company is the ownership structure. If all the shares rest with one "rugged individual," it shows a family business is still in its infantile stage, even if the revenue is strong. That desire to hold on to equity is a common trait in entrepreneurs. Even Sam Walton initially resisted sharing equity in Wal-Mart. But Walton quickly saw the results when he shared profits, and then equity with his executives and team. I think Kau would enjoy a similar experience.

Read more: http://www.financialpost.com/scripts/story.html?id=2176257#ixzz0of8GKwee
Stewart Thornhill, National Post 

What qualities do private equity investors look for?

In addition to an outstanding management team and the firm’s performance at the transaction time, investors need to have confidence that the firm’s value is likely to increase after closing. The way a CEO communicates to the investor counts. Eric Burke, founder of Torquest Private Equity, pointed out that “investors never buy the hockey stick scenario”. If your company’s earnings have been steady in the last while but you are telling an investor that you expect earnings to go up rapidly like the shape of a hockey stick after a major capital investment, you need to provide solid information and reasonable assumptions to back up your projections.


Ultimately, an attractive deal to an investor is a business that has multiple competitive advantages that together act as a spring board to increase profits within a reasonable time frame, say 3 to 5 years. Truly outstanding competitive advantages are often unobvious to casual observers. Therefore, you as the CEO or your agent need to communicate to investors in a convincing way what the competitive advantages are and why they will be sustainable.
Jacoline Loewen, author Money Magnet

Ivey CEO Roundtable for Family Business Owners

The Ivey Business School has the Center for Family Business and David Simpson often joins with Loewen Partners to bring together family business owners for regular discussions. This time, family business owners will be discussing how private equity can work well with family business owners and survive for many generations.
The speakers are private equity experts who are Canadian but working in the US.

What Business Owners Should Know
American Investors – What They Want and How They are Different

Find out what American investors are looking for from Canadian companies and how they work with entrepreneurs north of the border. Gain insight from Canadian investment professionals working in the U.S. for American firms. Learn about their lessons and experiences.

Join us for a peer-to-peer conversation with leaders from the world of private capital as investors and entrepreneurs share their knowledge of private equity investing and cross border mergers and acquisitions activity.

Speakers

What Does American Money Seek in Canadian Companies & How Does It Work?

Monitor Clipper Partners, Boston – Bill Young, Founding and Managing Partner

As a professional engineer, Bill Young brings a practical enthusiasm to companies in Monitor Clipper Partners’ portfolio. Bill has worked with Monitor since 1989. He was a founding partner of Westbourne Management Group in Toronto, Canada, providing management services to companies requiring turnarounds. Bill began his career as a design engineer with Imperial Oil, Canada. Bill holds an M.B.A. with Distinction from the Harvard Business School and a B.A. with Honours from Queen’s University in Kingston, Ontario. Venue: The National Club, Toronto tickets $150 http//www.loewenpartners.com

7 Reasons Why Strategic Planning Can Fail

When the Japanese shocked the American car industry back in the Seventies, everyone wanted to study their strategy and methods. Surprisingly, the Japanese had embraced the American Total Quality Management methodology by Dr. Deming which had been turned down by American manufacturers. When I received Max Carbone's description of strategy, I was reminded of Dr. Deming and his TQM framework which had as the last step of the cycle - celebrate! Read below Max's comments on strategy and Number 7. I rarely see this point made in business. 

1.  Weak Market Insights

Many leaders and teams engage in strategic planning without having sufficient knowledge about market needs and competitive position.  Having independent research to identify what your customers want, what they think of your firm and how you compare to your competitors is invaluable to know what your game plan needs to be.

2.  Lack of Shared Vision & Values

Leaders that don't invest the time to craft their vision and values will inevitably have teams who waste precious energy by working at cross purposes.  Successful investors, business leaders and management gurus all agree that winning teams develop and live by a common vision and set of values to drive results. 

3.  Unfocused Targets

Leaders, individuals or teams without focused, quantified goals tend to drift and simply don't achieve what they are capable of.  Crafting an agreed upon set of goals, strategies and actions by any team is the best way to realize business potential.

4.  No Accountability

It's great to come up with a plan, but without holding team members accountable to one another, even an exceptional plan is likely to fail.  Having a disciplined process in place to ensure accountability will significantly improve performance. 

5.  Poor Implementation

Studies show that high performing teams must be in the top quartile of performance as determined by their customers to achieve exceptional results.  Creating a culture where great implementation is expected is an imperative for any business leader.

6.  Inappropriate Behavior

Surprisingly, more than 25% of team members in any company may have the education and experience, but the simply don't have the right psychological behavioral profile to play their position!  Leaders need to know the profile of their team to ensure they have the ability to perform in their role.

7.  No Fun, Adventure or Spirit

Finally, the best game plans need to be engaging, fun and adventurous.  Building a positive team spirit is probably the most important and challenging work of any leader.  Making business fun is what the greatest leaders do.  It may be the greatest single attribute between a strategic plan that works and one that doesn't.


Max Carbone, Teamworks.416.721.6359 

The Power of Iconic Brands - New Owner of Brooks Brothers Tells It All

“Put away your work, I have arranged for you to go to Brooks Brothers and choose a new shirt for the summer.” Imagine if your boss said that to you this Friday? Would you be motivated come Monday morning?

The American brand has arrived in Toronto, and upon walking across sisal mats trimmed with khaki borders and seeing slipper chairs with crisp white cotton covers, I knew this was authentic colonial style at its best.  My brother-in-law, a Brooks Brothers walking advertisement, always told me that Ralph Lauren was a poor man’s version of the Brooks Brothers brand, and once you visit the Toronto store, it is tough to look at the polo symbol the same way again.

Brooks Brothers was rescued from the bungled mis-management of Marks & Spencers by an Italian named Claudio Del Vecchio. What could an Italian add to Brooks Brothers – Gucci flash, Versace shock value? Would we see Madonna in blue seersucker now, clutching a massive silver trophy provocatively?  I was curious and jumped at the chance to attend a family business evening held at the Brookes Brothers store by the Chairman and CEO.  Claudio Del Vecchio demonstrated elegance you only find on the Continent, combined with Oliver & Bonacini serving up amuse-bouches all evening and the opportunity to experience the store - what a smart evening.

As Evan Thompson, representing Family Firm Institute, put it, "Brooks Brothers is an icon." 

Claudio picked up this theme and spoke about understanding the essence of a brand. His early years working in his family business, creating and achieving the globalization an eye-glass empire, gave him the foundation to know how to speak to the client, but then act to bring in their requests. I could see that Claudio was humble despite his global success, and loved to know how to thrill his core clients. He respects the brand of Brooks Brothers' smell of New York Wall Street success and money, but I could sense a whole new level of style elegance, lifting it from staid to - yes - Italian elegance. When I checked out the magazine, there was a great article with photographs on how to combine shirts and ties which I showed to my teenage sons, who actually spent a few minutes discussing how to dress well. Remarkable! Now that is smart brand management and Claudio’s quest for stylish perfection is being appreciated by my family's next generation. That is a legacy brand - truly an icon.

Jacoline Loewen, expert in family business and author of Money Magnet: Attracting Investors to Your Business. Invited to family business event by family business estate planning leader: Glenn M. Davis, LL.B., MTI, TEP, Principal Mercer, glenn.davis@mercer.com  www.mercer.ca

Family business is not a gift, it's an anvil

"The gift of a family business is not a gift, it is an anvil," says Tom Deans, family business owner and author of Every Family's Business. Tom reasons that second generation family businesses can slip in profits and by the third generation, the statistics tell the story, as only 10% of family businesses make that leap.
Tom agrees that a family business can pass along intellectual capital as well as the financial capital. He believes, though, that passion for living and having strong, family values count for a great deal more. Tom says, 'Wealth is not about passing along a business. It is about teaching the next generation about life lessons that matter."
The family business is a source of prosperity but if you can bring in private equity partners who are far more objective and performance driven, the business has a better chance of survival and growth. That is good for the employees and the Canadian economy. The wealth coming from the business can be put into a portfolio for the family and they have a better chance of keeping family relations the way they should be.
Strong family, strong life.
From speech given at Blakes law firm, Toronto.
Jacoline Loewen, expert in private equity for family business.

Event: Attracting Investors to Toronto Businesses

Monday, May 17, 2010 @ 6 PM

Ben McNally Books

366 Bay Street

 

Join the next Mayor of Toronto, Sarah Thomson, and author, Jacoline Loewen in a discussion: 

How Toronto Businesses Can Attract Investors

Jacoline Loewen is the CEO of Loewen & Partners, a private equity firm which helps companies finance their growth by finding and matching them up with investors.

Your Cost: $37.50
City Rebate Cheque: $112.50 (you will receive a cheque from the city)
Ticket Price: $150
$200 at the door (your cost $50 and City Rebate $150)
Please pre-register here: http://sarahthomson.ca/event/books-and-fundraiser

or contact Kinga Surma at 416-964-5850 to process payment
If you can't make it, but would like to make a donation to the Sarah Thomson Campaign for Mayor,
please click here: http://sarahthomson.ca/donate/

People do not buy what you do, but why you do it.

If you hire people who can do the job, they will work for your money, but if you hire people because what they believe in what you do, then they will give you their blood, sweat and tears.

You can hire the best minds that money can buy but if you are not passionate about why you are working as a team, you will not go as far. At the time of the Wright brothers who were trying to figure out how to fly, there was a competitor who we do not know, unless we do deep research. This man had the best minds from the top universities, tons of money and the newspapers following him around. In comparison, the Wright brothers had no money, not a single person on the team had a college education and the media ignored them. Wilbur and Orville's competitor was pursuing the riches and fame. The Wright brothers were driven by desire to take flight. The irony is that the day the Wilbur brothers took flight, there was no one there to witness this historic event. That same day the brothers took flight, their competitor quit. I found that shocking but it makes sense because he was seeking a hollow reward, the Wright brothers were seeking to soar into the sky in a flying machine not for fame, but for the sheer challenge. Imagine their pure joy rather than someone counting the financial riches.
This concept that customers buy why you do your company reminded me of Dani Reiss, owner of Canada Goose, a Canadian family business. Dani says, “Manufacturing is going to come back to Canada because consumers want authenticity. This is becoming increasingly important worldwide and people are taking more interest, not only in labour-friendly goods, but in iconic genuine brands with substance. We gained extensive manufacturing expertise making private label clothing. Learning a little bit from each brand helped us to create the best parkas on the planet."
Canada Goose has made Profit magazine's Next 100 as one of Canada's fastest-growing companies. Maybe Dani has a point about manufacturing?

People do not buy what you do, but why you do it. What do you believe?
Watch the video.

Jacoline Loewen, family business expert

Your actions add up to who you are today

This week’s Fast Friday leadership words of wisdom comes from the multi-talented Jacoline Loewen entrepreneur, author and triple A dynamo…

“Every action you take is like a grain of sand that adds up to who you are today.”

Only you can decide what actions you will take to shape the leader you want to be.  That’s a powerful thought.  What type of leader do you want to be?  What type of leader are you becoming? 

What actions can you take today to get you closer to where you want to be?

Happy leading!

Read more about Glain and her leadership series. 

There’s something really nice about family business when it works

Customers like family businesses and feel better about giving them their money, even — and in the US especially — if they are already stinking rich and famous. Family companies have a more direct relationship with their customers.

“We have an identity. At Four Seasons or Ritz-Carlton, there’s no one really to identify with,” says Ivanka Trump, daughter of the famous Donald Trump. “If someone has a complaint, they literally write ‘Dear Donald Trump’.”

Private equity likes family businesses too. Most private equity firms partner with a business for five years or less, and they like a mature company. The fourth generation Smucker who is also the CEO, told me that he does the day-to-day decision making but he has professional managers for running the value chain and private equity to assist with strategy and financial engineering. Once family business owners understand that they are the biggest asset, hey can relax and plan for the next generations to get involved, even if that means not being in the business but being the custodian of wealth. Coke, Wrigleys, Firestone are all family business brand names that have passed down generations and are run by professionals but families have control, ownership or a blend of the two. People trust family businesses and they are the celebrities of business.
The Trump family is teaching a whole new wave of what it means to be a family business. Being a famous family business also saves money on marketing. Trump SoHo gained instant prominence in 2006 when Trump unveiled it on The Apprentice. The Trumps do not need to pay celebrities to attend their glitzy launch parties because they are the celebrities. When a new building or hotel opens, Ivanka does a profile “here” or a photoshoot “there”. 

Even Don Jr pitches in. “I offer to get into the G-string, too. I’ll do whatever I can for the bottom line.” Trump’s brand strength also means he can license his name and manage hotels but get developers to pay for the construction. Trump is notorious for risking little of his own money upfront. And, of course, there is the F factor — family. 

As products of obscene wealth and self-absorbed, pathologically competitive parents whose marriage collapsed on the front pages, Don Jr, Ivanka and Eric are prime candidates for dysfunctional, useless brats. And even if they can write their names in the sand with a stick, can they work together? For every successful family firm out there — Walmart, Viacom, Rothschild — there’s a Gucci. The Florence-based fashion house imploded when relations between family members got so bad one tried to murder another.

So, how are they doing in SoHo? It is a Wednesday morning in Manhattan and Don Jr, Ivanka and Eric are meeting the Trump Hotels’ boss, Jim Petrus, for a hotel performance review. Rooms are shifting, but not at the $500-plus a night Trump had hoped to be able to charge. The rate is less than $400. But SoHo is near Wall Street and Petrus hopes to sign lucrative corporate accounts. “We’ve 32 signed,” he says, reeling off a list of most of the blue-chip banks. While hotel rooms are selling — at the right price — sales of condos in Trump SoHo are sluggish. In Trump Hotels there are usually some pure hotel rooms and some condos that buyers can use for a certain number of nights of the year. Only about a third of the 391 units in Trump SoHo “are now in contract”. Bank of America recently effectively wrote off a loan on the project for a fraction of its $75m face value.

Donald Trump Jr concedes that “the real-estate market is less than stellar”, but insists Trump is performing better than other developers. “We’ve refinanced debt and made deals with banks because we have a proven track record of success and because our product continually outperforms our competition.” He anticipates a boost in interest in condos in Trump SoHo now that the hotel is finally open. Few doubt the mini-Trumps’ determination to succeed. Listening to them, it is clear they have inherited their father’s creativity and determination — some would say ruthlessness — especially Ivanka. In a meeting to discuss hotel openings, it is she who says that any outside firm contracted to Trump must agree to put up its employees at Trump properties when they travel. “When I send them their first cheque, I’m like, ‘By the way, as part of your retainer, you’re gonna give us all your people!’” Later, the conversation turns to a client who needs “a smack”.

The top Trumps are so steeped in business that at times they say bonkers things. Asked how his wife, the model Vanessa Haydon, feels about him being away from home up to three weeks a month, Don Jr replies that she knew his schedule before she married him, or as he puts it, “She bought with full disclosure,” as if his wife were a Park Avenue building he had just closed on.

It is no surprise that they should act this way. It is all they have ever known. The Trumps were schooled in business before they started going to school itself. “From a very young age, my father would say, ‘Remember, don’t trust anyone,’” Don Jr recalls. “That sounded weird to a four-year-old. To test me, he would follow up with, ‘Do you trust me?’ I’d say, ‘Yes. You’re my dad.’ He’d say, ‘You’re an idiot!’” Later Don Jr began touring buildings with his father. “We never played catch or ball, but I saw him complain about ceiling heights.”

Don Jr, Ivanka  another family business grows. Donald Trump is the daddy — and the boss. Donald Jr, Ivanka and Eric, his children, are his real-life apprentices. He wants them to take over his business. Will he end up telling them: ‘You’re fired!’

Read full article:
Jacoline Loewn, author of Money Magnet, how to attract investors to your business. Watch interview Financial Post, John Turley-Ewart.