Do You Really Want a Job with Private Equity?

Why job hunting at a company partnered with private equity is nothing like you have

experienced before.

Looking for a new job this year?

There are interesting career opportunities being created by owners of

companies who are partnered with private equity. I hire for these unique

businesses and have come to see a huge difference compared to corporate

recruiting.

It may seem choke on your chai tea rude to say businesses with private

equity on board do not care about your career. If you grasp this difference

though, you are more likely to get the job and make them care.

These businesses have owners. The private equity partners are also owners.

Can you put yourself in their shoes and realize how you will impact directly on their personal bank balances?

These owners are self made, ego driven characters. They have been beaten

up; it's no longer business as usual, rules have changed big time. Owners

take risks at major cost to them and their families. Now they are risking it all

again to make the leap to the global market.

Take Guy Ritchie--Madonna's ex-husband or play thing--he knew to leap out

of England, into the international movie scene. (Nothing like scorned love to

make you be creative.) Guy came to terms with losing some control and

partnered with private equity. Even though he managed to pocket a 50

million pound settlement from his missus, his private equity partners raised

$80M to film his meandering, but wryly amusing Sherlock Holmes movie.

With this partnership, Guy was able to bring in talent to appeal to a crowd

not familiar with Stephen Fry, Baker Street or high tea. The scenes between

Robert Downey Jr. and Jude Law were the best part of the movie for me,

although I am also rather fond of Rachel McAdams, but preferred her in The

Time Traveller's Wife. Did you know Brad Pitt was the executive producer?

I digress.

And that is exactly what I am talking about - when speaking to private

equity companies, do not go off on tangents, no matter how delightful

and deliciously amusing these may seem. You will appear off target and

plain wasteful.

Keep all conversations (phone calls especially) razor focused on the actions

required on the job within the first six months; why you are the one to do

this urgent and purpose-filled work. The information to get across is your 3

step plan to make the business more money than Brad Pitt could hold above

his head.

Working for owner managed companies is not like the 100 Top Companies

with toaster oven prizes at the monthly beer bash. Owners are anxious for

results, for action, for hefty pushing the wheel up the hill. Leave out

indulgent chats about your recent ski trip, why you can not make a five

o'clock appointment because you have to pick up the kids, how your child

won a scholarship to Ivey, is visiting Nepal, is on drugs or whatever. You

think you are bonding, they are hyper-judging.

If you are from a corporate environment, you will be suspected of having soft hands,

soft soaping your seniors rather than telling the harsh truth and comfortable

calling in consultants rather than rolling up your own sleeves.

Understand that about 150 other people applied, and there are 5 who are a

better fit. Realize that you can leap frog them by knowing this one tip: it is

not about your stupid career, it is about how you would help the company

bring in cash flow.

Companies where private equity is a part owner really, really care. Have

you made a company performance oriented? How did you contribute to the

top line, not the bottom line (and if you don't understand that - call your

favourite business coach.)

Private equity partnered companies work lean but give opportunity to use

brains and skills. Former armed forces people can be found in private equity firms probably because they are used to jumping out of helicopters with people screaming "Go, go, go!" That is the environment. If that does not appeal, go to the Post Office. I hear they have terrific careers.

Jacoline Loewen is a financial consultant to business owners, raises capital to grow the business and is the author of Money Magnet: How to Attract Investors to Your Business. 

 

The City Needs to Get out of the Way of Business

Ford for Mayor! Last night, at the Mayors' debate, he said the most profound statement about the City's role.
Ford said, "We need government to get out of the way of business." 
He went on to explain that government needs to let the business people get on with what they are trying to create and get on their side instead of against them.
Pretty profound.
I would like to see Ford get a big vision articulated of Toronto as a City for Entrepreneurs to come and set up as there is smart university talent here for employees, etc.Miller had his Green City, we have heard about being a Creative City, what about being a City that supports business operators?
Another point is that the mayors seem to think that all businesses are stores or cafes. There are high intellect businesses too and we also want the City to help us.
If there is funding to going to parades, what about an engineering competition and forum. Instead of just parties and drinking, what about intellectual business events? 
I am grateful though that most of the candidates realize it's time to downsize and help business do what they do best. 

Smackdown at the Gladstone

Grocery Gateway and Real Programming for Kids founders and owners are my guests to the 6 Mayors' discussion tonight on "what can Toronto do for business?"
It will be interesting as Ford, Thomson and Rossi have all had the pain of running their own businesses and know the rock face it can be.
When I listen to Stephen Tallevei, founder of Grocery Gateway, talk about his uphill struggles with getting his online grocery store to succeed, you know why being invited in as a private equity partner is a privileged partnership. Elliott Knox, RP4K, runs thousands of programming courses for teens each year and he describes his last year as similar to climbing to the top of Hamburger Hill and sent me the link to the movie.
We will be at The Gladstone Hotel, redone by the architect firm,  Zeidlers, and it is unbelievably glamourous. Anyone can attend the talk and we must thank Globe & Mail for hosting such a worthy event.

Is China ending its relationship with Capitalism?

I am listening to the head of GE speak in Toronto at an off-the-record speech to my secret handshake club.
His remarks on China at a private function were disclosed last month and have continued to stir up debate about China and America's relationship. Here is a terrific comment in response to an article on China:

I've spoken with executives at American companies that tell me they have "their own factories" in China, and they seem proud of it. But then when I ask, "Doesn't the Chinese government own 51% of your factory?" they'll then say "Yes, well, err, that's the way they do things over there, but it's our factory!"  

Not really. Since we began on this road to globalization, that is, free and mostly unregulated trade, just about the same time that Chairman Deng was opening China to Western capitalism, China has played us for fools. We've taught them how to make everything we know how to make, from steel to computers, iPods to cell phones, giftware to American-style furniture, and all the fittings and components and add-on's as well.When we decided to invade Iraq, Congress and the Bush Administration decided to keep the costs off the books and out of the budget, so we borrowed as much as $200 billion each year from China and Saudi Arabia, and a few other countries here and there. This, at the same time we were running a trade deficit with both countries and had to borrow from them to be able to afford importing all those great things we buy from China and all that Saudi oil. So while we were forcing American businesses to set up factories in China that brought in labor from the countryside at a whopping $5/day for 60 hours/week (no labor unions in Communist China, I suppose), we were exporting our manufacturing base and all of our manufacturing technology to that country and in the process enriching the Chinese government with virtually every dollar we spent. Now we're in a so-called Great Recession in which we're having to face the fact that we've lost literally tens of millions of good-paying manufacturing jobs, and China is doing great, up 10% a year, raising its general wage to another whopping $6.50/day and building what will become the second strongest naval, air and armed forces in the world. Not to mention their advanced missile technology, which they'll sell to anyone with money to buy it.

We've been such chumps.
Of course, Obama says he has a plan to create great jobs that can't be outsourced. Nonsense. The Chinese are way ahead of us in wind and solar technology. They've taken their riches and put it into vast new infrastructure projects and research, and when we finally have the resolve to build those new highways or create that new electric grid it will be with Chinese machinery and technology.
The Republicans are no help either, as they don't seem to have a clue about how to create jobs. They just want to protect the banks and Wall Street so they have the money to win elections and make it easier for the rich to get richer while denying any help at all to everyone else.
I see no future for this country unless and until we confront the outsourcing of jobs to China head-on. Globalization doesn't work for us when overseas labor is so cheap. China doesn't play by the same WTO rules in any case. It's time to establish bilateral trade agreements with key trading partners under which they can't export to us very much more that we export to them. At the same time, we need to protect key industries that are vital to our national security, like steel, metal fabrication of all kinds, shipbuilding, electronics with military uses, on and on.
There's no other way out of the downward spiral of cheap goods forcing Americans out of work, so they have less money and have to buy cheap Chinese goods, which leads to more layoff's, and down we go to being a third world country. It's time someone in Washington, and in the media, had the courage to call a spade a spade. The loss of our manufacturing base is what's killing America and unemployment won't go down until we begin to restore it.

4 Worries for Owner Operators According to Private Equity

Private equity fund managers are in touch with the business operator/owners and report that the top issues keeping these business leaders up at night are:
1) Key employee retention
2)  Management Succession in the C and V suites
3) Customer retention
4) Operational efficiency

What do you think?

Entrepreneurial Businesses Drive Job Growth, says Harvard

Politicians are too likely to guess wrong about which industries are worth attracting. With job growth worrying politicians, Toronto City Hall may be tempted to chase big companies to take a tax break and set up shop.
"That's a misguided approach," says Ed Glaeser and Bill Kerr, Harvard.
Job growth and the big economic development coming from these new work roles is now proven to come from the successful incubation of "small, entrepreneurial employees--not a few big companies." Even adjusting for variables such as tax or industry, Glaeser and Kerr say, "the relationship between small firms and job growth rate stands."
Industries with smaller firms and more start-ups had faster job growth than an industry an industry in the city without a cluster of start-ups. So a gnat like cloud of small companies buzzing around larger companies will be far better suited to job growth.
According to Glaeser and Kerr, apparently large companies generate less job growth than these "gnat" sized businesses. Also, once a city establishes itself as entrepreneurial, it tends to be self perpetuating.
So Toronto needs to market itself as a City for Entrepreneurs.
A big thank you to The Globe & Mail for organizing a 6 Mayor Candidate Town hall on what to do for business.
Give your views on Facebook to:
Sarah Thomson
Rocco Rossi

4 Reasons Governments want to help Business

Business owners will be able to attend a town hall on how Toronto can help business. Thanks to the Globe & Mail for sponsoring the Sept 9th discussion with the 6 mayor candidates.

The economy has changed business as usual approach by government from city to country levels and encouraging a return to government involvement from puppet master to financial supporters of business. 

Four main forces are driving this revival of industrial policy. 

First is the weak state of the world economy. Governments are under pressure to reduce unemployment and stimulate growth: support for chosen industries is a way of saving jobs and helping local firms fight foreign competitors. 

Second, some countries, such as America and Britain, want to rebalance their economies away from finance and property. Along with older manufacturing, clean technology is emerging as a favourite direction. Nearly every large economy has plans to win global market share and create green jobs.

Third, emergency use of industrial-policy tools leads to demands for more. Mr Obama has responded to complaints that only big companies such as General Motors and AIG, an insurer, have enjoyed the state’s largesse by setting up a $30 billion small-business lending fund. 

Fourth, rich countries are responding to the apparently successful policies of fast-growing economies, notably China and South Korea.

Industrial policy remains controversial. Defined as the attempt by government to promote the growth of particular industrial sectors and companies, there have been successes, but also many expensive failures. Policy may be designed to support or restructure old, struggling sectors, such as steel or textiles, or to try to construct new industries, such as robotics or nanotechnology. 

Does Government Involvement in Business Help or Hinder?

Toronto's Mayor candidates will talk to entrepreneurs about how the City can help. I have been asking business owners about their thoughts. These owners tend to run companies that are making a decent cash and the majority say,  "Simplify paperwork, taxes, hiring and firing rules and stay out of the way." They do not reach out for government programs like SREDS and find these annoying. Lawyers, who make a good living from explaining the difficult rules, may not like these ideas. I have also noticed that the companies that look for help from the government are often the ones who should not be getting a subsidy, while the stronger ones do not reach out for programs.

So, does Government involvement help or hinder business development? Many governments are now looking at industrial policy. Justin Lin’s book is well worth reading on the topic. He tries to sort out good industrial policy from bad. 

When does state intervention lead to structural upgrading, a la East Asia, and when does it merely generate a bunch of uncompetitive companies being kept on artificial life support by state subsidies, as sometimes happened elsewhere? His conclusion is that the state should not depart too far from a country’s comparative advantage, but consciously push it towards upgrading by imitating neighbours that are similar, but have travelled further along the upgrading path – basically the East Asian ‘flying geese’ model. 
Think of it as the state pulling a country along by a piece of elastic – pull too little and nothing happens, pull too hard and the elastic snaps. 
For a review of his paper, and Justin’s response in a guest blogpost, visit Oxfam’s From Poverty to Power blog onhttp://www.oxfamblogs.org/fp2p/?p=2982.

A useful industry that will probably become more useful as it becomes less grandiose

Less Pomp and Circumstance and more humbleness is wanted from private equity, according to The Economist.  The recent article goes on to go over the same, tired hypothesis that private equity developed a weak model of using bank debt madly (which the banks were throwing at Private Equity) and buying up companies like drunken sailors.
Yes, and the government policies and mortgage craziness had nothing to do with the last three years?
The Economist does grudgingly admit that zero of the top 20 companies owned by private equity have gone under or needed a bail out, while banks have been wiped from the top 100 Bank list. Canadian banks find themselves in the top 20 banks in the WORLD!
Here is a look at the article:

IF PRIVATE-EQUITY outfits were once the kings of capitalism then during the credit crunch they behaved a bit like George III. Gripped by a bout of madness, they overpaid for firms at the top of the economic cycle and loaded them with too much debt. Today private-equity types are quick to admit things got out of control, just as in the buy-out booms of the late 1980s and 1990s. Most big shops, including Blackstone (see article), are keen to clean up the mess and move on. Yet it will take the industry a long time to rebuild its credibility.

Capitalism still needs private equity in its pure form. The stockmarket is not good at dealing with some firms—those that need surgery, are in the grip of bad bosses, or in industries that fund managers sniff at. Then it can make sense to have a lone, obsessive owner—particularly if it uses a dollop of debt to concentrate managers’ minds and locks in its own investors so long-term decisions can be made. The mere threat of a buy-out also helps keep managers at all listed firms on their toes.

The 2005-07 boom was damaging because it was so wild. Some $1.6 trillion of buy-outs took place—not far off the total for the preceding three decades, after adjusting for inflation. There was also a shameless degree of mission creep, with buy-out firms investing in volatile industries that are allergic to debt, such as semiconductors, and taking stakes in listed firms much as any investor might. A few private-equity outfits even listed their own shares and managed to keep a straight face.

READ MORE

Pay to Get Investor Ready

"Founders, do not fall in love with your product or your people.  Before you talk to anyone about funding get experienced people to rip your strategy and pitch apart.   You only get a few chances to get it done so make sure they count. Network like there’s no tomorrow.  Gather people around you who have proven “big league” execution skills.  Talk to everybody who can spread the message and bring value.  Get yourself down to the Valley. Cold-call and get connected to anyone who can make your business move faster and smarter.  If you don’t your competitor will."
Howard Gwin tells Canadian owners, "Bring it or stay home.  If you are in the Canadian technology ecosystem, run faster, harder and set higher goals or we are going to fall behind – and we will not catch up."
READ MORE of Howard Gwin
I read  Howard's article just after I saw yet another owner-operator who had a healthy company at $20M, but waited until it dropped to $9M to speak with Loewen & Partners. The damage was too bad by then. The worst part was that he had bought out his partner and debt and it was ALL his own capital in the business. Rule # 1: Use other people's money. Rule #2: As Howard Gwin says - Bring it or stay home. Realize that this is the time of private equity and the money is here now. If you don't, your competitors will be accessing private equity and think how much market share they could gain.