I don’t think even today that we truly comprehend the incredible magnitude of what has happened, and what is happening, to the global banking and financial business.
With so much government involvement and government ownership of big banks in both the U.S. and the U.K., we won’t know the full impact of all of this for a decade.
The stock market impact has been significant.
- the Standard & Poor’s diversified bank stock index is down 72%
- the financial index is down 76% and
- the insurance composite index is down 72%
The TSX Bank Stock Index is only down 50% - isn’t that wonderful – (we have outperformed).
I am not going to dwell on the causes of this crisis because they have been extensively and well covered in the press.
They include;
- Major public policy failure in the U.S. in the housing area.
- Far too low interest rates and easy credit under Alan Greenspan.
- Failed financial innovation on a massive scale.
- Almost complete regulatory failure in the U.S., U.K. and Europe – it was the age of deregulation.
- Total rating agency failure - - for the tenth time and
- Finally, too much leverage everywhere you look.
You could write a book on each of the above but I think Money Magnet - my latest book - will be one to help business owners understand how to access new money now that the banks are being restructured.
March 5, 2009
March 4, 2009
Succession Planning Family Business is a Nightmare on Elm Street
Our guest blogger is Tom Deans author of Every Family's Business.
If so many jobs, so much wealth wasn't collateral damage when a family business is gifted, watching them pass to the next generation would continue for some to be the best theatre ticket in town.
But lenders and their shareholders aren't laughing as the single largest generational transfer of wealth begins in less than ideal economic circumstances.
If the questions that a family can ask themselves to protect their wealth weren't so simple, the impending destruction of so much wealth wouldn't be so sad.
On this point there is no debate -- at least not for me. Having watched three generations of my family start and sell their businesses instead of gifting them, the next generation has always been free to pursue their own great big idea.
Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
If so many jobs, so much wealth wasn't collateral damage when a family business is gifted, watching them pass to the next generation would continue for some to be the best theatre ticket in town.
But lenders and their shareholders aren't laughing as the single largest generational transfer of wealth begins in less than ideal economic circumstances.
If the questions that a family can ask themselves to protect their wealth weren't so simple, the impending destruction of so much wealth wouldn't be so sad.
On this point there is no debate -- at least not for me. Having watched three generations of my family start and sell their businesses instead of gifting them, the next generation has always been free to pursue their own great big idea.
Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
March 2, 2009
Does a Family Business Mess up the Next Generation?
Our guest blogger is Tom Deans, Author of Every Family's Business.
Founders who gaze upward and utter the phrase "(insert company name) will always be family owned" are either delusional, narcissistic, or neither and just really get a charge out of messing with the heads of their children who lust for stuff -- free stuff.
I think most founders know that the businesses they gift are anything but easy to receive --are anything but easy to operate and sell.
The founders who gift businesses may indeed dish out what junior really deserves.
The profile of the spendthrift child with no discernible work ethic is well documented in popular culture and usually on display in Toronto at the Four Seasons in Yorkville most afternoons.
Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
Founders who gaze upward and utter the phrase "(insert company name) will always be family owned" are either delusional, narcissistic, or neither and just really get a charge out of messing with the heads of their children who lust for stuff -- free stuff.
I think most founders know that the businesses they gift are anything but easy to receive --are anything but easy to operate and sell.
The founders who gift businesses may indeed dish out what junior really deserves.
The profile of the spendthrift child with no discernible work ethic is well documented in popular culture and usually on display in Toronto at the Four Seasons in Yorkville most afternoons.
Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
March 1, 2009
Sell Your Family Business, Don't Gift It
Our Guest Blogger is Tom Deans, author of Every Family's Business:
So if gifting is out selling is in.
But with more sellers than buyers the inclination of throngs of aging business owners will be to wait out this down cyle and sell the business later when they are really ready to retire --you know when they are in their 80's and junior is hitting his prime in his 60's.
Truth be known little in the way of succession planning has ever been done to transfer businesses intelligently.
The script usually unfolds with the business owner dying and the stock rolling to the surviving spouse. It's like a bad movie-- it's Friday the 13th but with more family drama and bloodletting --especially when you roll in some sibling rivalry, add a dash of liquidity crisis family business style when the taxman comes knocking to collect capital gains or estate taxes.To all the founders reading this --here's my message. Offer to sell your business to your kids. If they don't want to buy it, put in place a compensation package for them to help you sell it to someone else. I know that selling the family business can feel like selling family but nothing could be further than the truth when a founder aligns the economic interest of all family members. I have a sneaky feeling that when parents put in place these compensation plans for their children, the love of pursuing the longevity of their family firm will fizzle and fizzle fast (the bigger the comp package the faster the fizzle).
Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
So if gifting is out selling is in.
But with more sellers than buyers the inclination of throngs of aging business owners will be to wait out this down cyle and sell the business later when they are really ready to retire --you know when they are in their 80's and junior is hitting his prime in his 60's.
Truth be known little in the way of succession planning has ever been done to transfer businesses intelligently.
The script usually unfolds with the business owner dying and the stock rolling to the surviving spouse. It's like a bad movie-- it's Friday the 13th but with more family drama and bloodletting --especially when you roll in some sibling rivalry, add a dash of liquidity crisis family business style when the taxman comes knocking to collect capital gains or estate taxes.To all the founders reading this --here's my message. Offer to sell your business to your kids. If they don't want to buy it, put in place a compensation package for them to help you sell it to someone else. I know that selling the family business can feel like selling family but nothing could be further than the truth when a founder aligns the economic interest of all family members. I have a sneaky feeling that when parents put in place these compensation plans for their children, the love of pursuing the longevity of their family firm will fizzle and fizzle fast (the bigger the comp package the faster the fizzle).
Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
February 28, 2009
The Next Crisis - Family Businesses
Our guest blogger this week is Tom Deans, author of Every Family's Business:
It occurred to me that the sub-prime and resulting liquidity crisis is nothing compared to the much bigger bomb ticking away in family businesses big and small.
My prediction is that if the banks don't begin to press harder for evidence of real succession plans, the $10 trillion sitting in the retained earning of North American family businesses will dissappear faster than you can say Lehmann Brothers sell Lollipops by the Sea Shore.
When I say "real succession plans" I mean evidence that gifting the family business to junior isn't the plan. Gifting an operating business to dis-interested, ill-prepared, incapable hands of family is not going to cut it with lenders, shareholders, customers or employees.
by Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
It occurred to me that the sub-prime and resulting liquidity crisis is nothing compared to the much bigger bomb ticking away in family businesses big and small.
My prediction is that if the banks don't begin to press harder for evidence of real succession plans, the $10 trillion sitting in the retained earning of North American family businesses will dissappear faster than you can say Lehmann Brothers sell Lollipops by the Sea Shore.
When I say "real succession plans" I mean evidence that gifting the family business to junior isn't the plan. Gifting an operating business to dis-interested, ill-prepared, incapable hands of family is not going to cut it with lenders, shareholders, customers or employees.
by Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com
February 25, 2009
Creative capitalism means private equity
Bill Gates is frustrated. He spoke about world poverty publicly with Warren Buffet at the last Davos conference and the conversation is now to be found in a book, but with the addition of economists weighing in with their views on the subject which makes for interesting reading.The book has a cumbersome title: Creative Capitalism: a conversation with Bill Gates, Warren Buffet and other economic leaders.
Gates and Buffet both spoke about creative capitalism which means companies that are not just working for their own dime but think far wider than that. For example, I did a project in South Africa for the largest mining company creating a data base of one person “businesses” near to the mines. The mine then hired these people on contract basis for cleaning, typing or temping services in order to support the community through work, not a hand out. People had purpose and money for work. The mine did not need to work in this more fragmented and unpredictable way, but they wanted to help the community.
One if the contributors, Larry Summers, is now an advisor to Obama who cautions this concept of creative capitalism and prefers to let companies pursue their own purpose. Summers cites Fannie Mae and Fannie Mac as a “really good creative capitalism idea” that did not work.
Perhaps Gates and Buffet are onto something says Economist Paul Ormerod who sees creative capitalism as buttressing the legitimacy of democratic capitalism against authoritarianism in China. Private equity is trying to improve its image and are early up-takers of this concept.
Creative is the second name for most Americans. Already, there have been thousands of get-togethers held across America to discuss the health care situation. Obama’s website gave a few starter discussion sheets and suggestions on how to organize each party. The answers to questions were sent back to the White House. There are naysayers, likening this movement to Tupperware parties, but people could add their own material and speakers.
Gates and Buffet both spoke about creative capitalism which means companies that are not just working for their own dime but think far wider than that. For example, I did a project in South Africa for the largest mining company creating a data base of one person “businesses” near to the mines. The mine then hired these people on contract basis for cleaning, typing or temping services in order to support the community through work, not a hand out. People had purpose and money for work. The mine did not need to work in this more fragmented and unpredictable way, but they wanted to help the community.
One if the contributors, Larry Summers, is now an advisor to Obama who cautions this concept of creative capitalism and prefers to let companies pursue their own purpose. Summers cites Fannie Mae and Fannie Mac as a “really good creative capitalism idea” that did not work.
Perhaps Gates and Buffet are onto something says Economist Paul Ormerod who sees creative capitalism as buttressing the legitimacy of democratic capitalism against authoritarianism in China. Private equity is trying to improve its image and are early up-takers of this concept.
Creative is the second name for most Americans. Already, there have been thousands of get-togethers held across America to discuss the health care situation. Obama’s website gave a few starter discussion sheets and suggestions on how to organize each party. The answers to questions were sent back to the White House. There are naysayers, likening this movement to Tupperware parties, but people could add their own material and speakers.
Anyway, what's wrong with Tupperware parties? I see citizens getting involved with their country.
Discussion educates and encourages people to see more than one side. Creative capitalism certainly creates integrity and Bill Gates and Warren Buffet have started this interesting conversation.
Discussion educates and encourages people to see more than one side. Creative capitalism certainly creates integrity and Bill Gates and Warren Buffet have started this interesting conversation.
February 24, 2009
Does gifting a family business destroy it?
Does gifting a family business destroy it?
With a large number of family businesses operating in North America, the idea that gifting a business to the next generation is mainstream thinking.
At a debate held by the Family Firm Institute in Toronto, Tom Deans was brave enough to contradict the wisdom of the masses. As the son in a second generation business, Tom went through the experience of joining a family firm and working hard to achieve a dream. Tom details the difficulties of conversations not had and questions not asked by family members destroys the family in the long run. In his best selling book, Every Family’s Business, Tom advices that every business should have a plan to sell.
During the debate, Tom explained that if both generations know there is a sale time and what the economic benefit will be for them, the trust will be high.
Trusted advisors need to understand that families shy away from these difficult conversations but that they could help. Using Tom’s 12 questions listed at the back of his book, every trusted advisor could be helping family businesses create the wealth that both generations deserve.
With a large number of family businesses operating in North America, the idea that gifting a business to the next generation is mainstream thinking.
At a debate held by the Family Firm Institute in Toronto, Tom Deans was brave enough to contradict the wisdom of the masses. As the son in a second generation business, Tom went through the experience of joining a family firm and working hard to achieve a dream. Tom details the difficulties of conversations not had and questions not asked by family members destroys the family in the long run. In his best selling book, Every Family’s Business, Tom advices that every business should have a plan to sell.
During the debate, Tom explained that if both generations know there is a sale time and what the economic benefit will be for them, the trust will be high.
Trusted advisors need to understand that families shy away from these difficult conversations but that they could help. Using Tom’s 12 questions listed at the back of his book, every trusted advisor could be helping family businesses create the wealth that both generations deserve.
February 23, 2009
Can companies pursuing their own purpose achieve more?
During these tough economic times it is too easy to get swept away by the general mood. I spent my Friday evening with people who had faced down cruel adversity and created something extraordinary.
I was at the Liberty Grand (with a thousand other people) as guest speaker. I was to talk about Meaghan’s Walk, which has raised nearly $1 million dollars for brain research at Sick Kids’ Hospital, Toronto, including $50,000 by TD Waterhouse. CTV was there to film the event and I was worried I would be caught on TV, struggling to finish my speech, caught up in the emotion of how the fund raiser began.
Meaghan’s Walk was created by Dennis Bebenek, who lost her five year old daughter to brain cancer but wanted to make this tragedy into something positive, and so she created a walk and fundraiser for Sick Kids' Hospital.
As Dr. Eric Bouffet spoke about how, as he phrased it, seed money from Bebenek’s efforts had been used for research that would not have happened otherwise, it became clear that medicine also needs its private equity, higher risk money. Dr. Bouffet emphasized that the money raised meant ideas that were not as main stream were researched and with good results. Bebenek’s drive to pursue her purpose for her daughter’s memory has achieved far more than government funding alone.
I was at the Liberty Grand (with a thousand other people) as guest speaker. I was to talk about Meaghan’s Walk, which has raised nearly $1 million dollars for brain research at Sick Kids’ Hospital, Toronto, including $50,000 by TD Waterhouse. CTV was there to film the event and I was worried I would be caught on TV, struggling to finish my speech, caught up in the emotion of how the fund raiser began.
Meaghan’s Walk was created by Dennis Bebenek, who lost her five year old daughter to brain cancer but wanted to make this tragedy into something positive, and so she created a walk and fundraiser for Sick Kids' Hospital.
As Dr. Eric Bouffet spoke about how, as he phrased it, seed money from Bebenek’s efforts had been used for research that would not have happened otherwise, it became clear that medicine also needs its private equity, higher risk money. Dr. Bouffet emphasized that the money raised meant ideas that were not as main stream were researched and with good results. Bebenek’s drive to pursue her purpose for her daughter’s memory has achieved far more than government funding alone.
February 17, 2009
Cash for Happiness
Ari Gold, of HBO's Entourage, once said, "Nobody is happy [...] except for the losers. Look at me, I'm miserable, that's why I'm rich". Though I tend to agree with Ari, a new study by the University of Pennsylvania's Wharton School of Business and published by Economist.com disputes Ari's quip on success.
According to the study, companies that were labelled "Best Company to Work For", by Fortune Magazine, provide better returns than the broader market. Alex Edmans, who conducted the study, says that Fortune's portfolio comprising of its 'best to work for' companies, has generated returns 4.1% higher than the CRSP Index, which includes all shares traded by the NASDAQ, the NYSE, and the AMEX.
In times of turmoil it is impossible to suggest that layoffs can be avoided. However, layoffs may be the catalyst to better things. An engineering friend with 12 years of experience at the same firm was let go recently, and he had some interesting insight into his predicament. He said, "I almost expected it, I don't really fit the culture anymore." Though competent and in demand (he would pick up a new job in less than a week), a new ownership team had come in last year that created friction with some employees. A wave of young, flexible, and eager graduates had been hired and slowly the 'old guard' was being removed. The young graduates were cheaper, more willing to take on new responsibilities, and more likely to act without much 'push-back'. The new ownership was essentially reinventing the identity of the company from the ground up, and for those who proved obstacles to the makeover, they were being removed.
Though it seems unfair, being laid off was the best thing that happened to my friend, "I noticed that I was getting lazy and bored,' he said '...complacent really" He was forced to leave a situation that made him frustrated for a new and challenging one that, more significantly, made him more productive.
Though qualitative and intangible, according to this study by Mr. Edmund there is a return on happiness. It may simply be the result of a proactive and energetic team, rather than a complacent and demoralized group, but a company that attracts and cultivates a happy group may be proving Ari wrong.
February 16, 2009
Private investment in Sports continues to thrive
Although Mr. Petty, CEO of Toronto's Maple Leaf Sports & Entertainment private company, did not know how the Fall 2009 ticket sales would go, seems as if sports is one place that still has profits. Spanish soccer fans are spending their pocket money on uplifting events. You can see Real Madrid and FC Barcelona came in 1st and 3rd place in terms of revenues.
As an aside, George Bush invested $850,000 into a baseball team and reaped $15M from the investment when he exited. Now if only he had done that sort of turnaround private equity investing magic for the USA.
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