5 lessons can we learn from Bezos’s rise to become the richest man

Interesting to learn that Amazon founder Jeff Bezos will become the world’s richest person this year, or next. After yet another fantastic report of results, and yet another boost in the company’s share price, Bezos is $5 billion away from the Microsoft founder Bill Gates and likely to overtake him soon.

From my view, I remember when Amazon was just starting and seemed an interesting but not a sure thing on the stock market. I sold my Amazon for AOL back in 1999. I was wrong! 

To learn that Bezos is now passing Bill Gates means that there are lessons to learn and Bezos shares his views. I am interested in how the title of richest person (that is tracked and legitimate) sets a role model for entrepreneurs and business leaders around the world.

After all, if making more money than anyone else doesn’t tell you they are doing something right, it is hard to know what might. 

So what lessons can we learn from Bezos’s rise to the top of the pile? In brief: That you should 

1. Think big, 
2. Innovate furiously, 
3. Ignore failures, 
4. Forget about obsessing over profits, and 
5. Avoid major acquisitions. 

Those are 5 pretty good guidelines for any business heading into the 2020s. 

In the past five years, Amazon’s share price has more than quadrupled, rising from US$220 to more than $US900 as the company powers into new industries and markets. He has already overtaken Warren Buffett and Amancio Ortega, the Spanish founder of Zara owner Inditex, to become the world’s second richest. 

Read the article HERE

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Jacoline Loewen, MBA, ICD.D, is a best selling author and expert in Wealth Management. She is Canada’s leading wealth, legacy, founder and family business finance expert. Ms. Loewen's clients are entrepreneurs who transition from focus on business to managing their money. She helps overcome common wealth creation issues while optimizing investments in order to manage and nurture significant wealth with confidence.

You never know when you might get that call from a buyer making an offer you can't refuse

If you are thinking about selling your company within the next few years, here are a few reminders to keep you on track. It's from a blog written by Alan Crossley who sells companies and who shares his observations about business owners as they get ready to sell. Here is an excerpt:

Some call these the Dog Days of Summer. The business world tends to slow down. I think it's a great time to reflect and regroup on how ready your business is for being sold. Even if selling seems a long way down the road for you, it's never too early to start. Plus, you never know when you might get that call from a buyer making an offer you can't refuse (or can you?). As for my Dog Days of Summer, I found an article (rather than write my own) on this very topic. A few points here that are worth noting: To read more...

Breaking down blockchain

Truck News

TORONTO, Ont. – If trucking wants to take advantage of blockchain, it needs to come together and work as one unified team.

That was the message from panelists at this year’s TransCore Link Logistics’ 20th annual conference at the Markland Wood Golf Club in Toronto.

Panelists, that included Dave Brajkovich, CTO of Polaris, Jacoline Loewen, director of business development at UBS Wealth Management, Mark Southey, executive v.p. of business development at Traffix, and Moe Sabry, director of IT at TransCore all agreed that the best way for trucking to be successful with blockchain technology is to work together.

The trucking industry is just dipping its toes into the water, so to speak when it comes to blockchain, because many don’t know much about it, or, don’t know how to get started.

Blockchain is, in simple terms, a digital ledger where transactions are made and recorded permanently. It is decentralized, in that information isn’t going to and stored in one place (like a centralized system), rather, several places.

The greatest advantage blockchain will bring to the industry that it desperately needs, is trust, panelists said.

“Blockchain will eliminate paperwork because there’s trust,” explained Southey. “Because we have all these nodes feeding information into a shared ledger…it means that when a warehouse puts 1000 boxes on truck, there is no question there are 1000 boxes on the truck. There is no proof required…and then we have trust between the shipper and the transporter. This negates the bill of lading. Because of that, we can automate payment. We can automate transfer responsibility. Half of our industry (with blockchain) can be automated. That’s where blockchain will have a fundamental shift.”

He added that the trust between driver and employer will also improve.

“Driver behavior won’t be questioned because it will all be recorded,” he said. “There is no dispute whether an action occurred or not.”
Brajkovich agreed, calling blockchain an API manager on steroids. He said the greatest advantage blockchain will offer transportation is quality, speed, and efficiency.

And while many may be panicking saying blockchain could eminate jobs like dispatchers or other administration roles within trucking, Barjkovich says this is not the case.

“Those people that handle paperwork today in trucking, they can be repurposed to do more efficient things,” he said.

He said that banks are the leaders in blockchain right now because they “are leaders together and understand that these paradigm shifts happen quickly.”

Right now only 1% of the supply chain industry is using blockchain.

“The industry needs to come together. If we can’t come up with a singular composed strategy, it’s going to be difficult to implement blockchain,” Southey said.

Loewen said to those in trucking who don’t know where to get started when it comes to trucking, should research groups you can join that are looking into blockchain now.

“There are all these business incubators,” she added. “There are lots of tiny companies looking for problems to solve. As individuals, go meet with these people. Give them problems to solve. They will likely solve them for you, for free. There’s some out of Ryerson University and some from Waterloo University. Canada is leading-edge with this stuff..you could go from a five truck trucking company to the next Walmart of trucking if you wanted to dream that big.”

The next gen of technology is here - Blockchain and Transportation

Transcore Conference with Jacoline Loewen, Blockchain

I am honoured to speak about Blockchain at the Transcore Conference - a great event designed for Carrier, Loaders and users of LoadLink.

Join us on July 16th.

Plus prizes to win!

4 steps for business owners to minimize personal financial risk

"My riskeist investment was into my business," says John Rothschild, CARA Operations Ltd. Read the full article here:
The following article is a summary of a conversation with Mr. Rothschild, CARA Operations, Ltd., speaking with David Simpson, Ivey Business School, at the UBS Speakers Series, 2018. We were honoured to have John share his journey from entrepreneur to managing wealth. 

Phaby Utomo, John Rothschild, David Simpson, Jacoline Loewen,

First published in The Globe and Mail, written by Jacoline Loewen.

Business owners are challenged to make decisions every day, and it is essential for them to know their risk tolerance.

“My riskiest investment was the ownership in my business,” says John Rothschild, senior vice-president of CARA Operations  and former Chairman and CEO of Prime Restaurants.

Mr. Rothschild knows about risk. When the opportunity emerged to buy Prime, a family owned business in which he served as an investment manager, he decided to take on the challenge despite the unhealthy balance sheet. His friends were aghast. He had a very comfortable life and he was in a strong financial position and they questioned his decision to risk buying a questionable business. Mr. Rothschild personally guaranteed all the loans required to make the acquisition.

He offered these four ideas on how business owners can minimize their personal financial risk:

1. Plan succession early.

You’ve seen the statistics: more than two-thirds of business owners over 60 years of age don’t have an exit plan. They want to sell their businesses, but fewer than 15 per cent are able to pass them along to a family member.

After Mr. Rothschild made the transition to business owner, he had to figure out how to take money out of the company.

“I knew that passing the family business to the next generation was not in the plans and that I had to monetize the business in a different way,” he says. “We did an income trust in 2002, where shares are held by outsiders. I had bought my business with borrowed money and personal guarantees. The income trust allowed me to pay off loans and personal guarantees, and there was some money left over. Also, I still got to keep my role.”

2. When opportunities come along, be ready to take them.

Mr. Rothschild says income trusts “were a great opportunity and only came by once.” Then he was faced with another opportunity when Fairfax Financial came shopping for restaurant companies. Fairfax is a blue-chip Canadian investment firm modelled after Berkshire Hathaway, founded by Warren Buffett, where the investment company buys businesses and holds them for a long time. Fairfax offered to buy the public part of Prime Restaurants and Mr. Rothschild was invited to stay on and grow the business.

“It was a defining moment when Fairfax then invested in Cara and merged Prime into it. Prime could have stayed an independent business, but the opportunity to scale up and turn something around was tremendous. You can’t pick your exit, or the moments when these opportunities come along, necessarily. You can just say yes or no. I saw this as the opportunity to make restaurant history. We are now the third largest in Canada.”

A business owner needs to plan for the company to be ready for monetizing at any stage, Mr. Rothschild explains. He pointed out that being ready is critical. For example, tax planning in advance is essential. When the opportunity arrives, that is a bad time to be starting your tax planning.

3. Know yourself and plug the gaps.

Mr. Rothschild recognized his strengths and he was honest about his gaps. “I don’t cook, but at Prime, I get to do what I love to do every day. I would tell people not to be afraid to go into an industry where you are not the core expert. It’s about running a business.”

Going from investor to business owner and operator meant that he needed to understand how to build customer loyalty.

When asked the key to success, Mr. Rothschild says: “It’s about the people surrounding me. My team is wonderful. I also had a five-person board for Prime Restaurants and the majority were outsiders who would challenge me, otherwise I would just be talking to myself. I can't make great deals by myself. I’m a numbers guy so I plug the gaps with people who have talents beyond my own.”

4. Take money off the table.

Keeping all your eggs in the one basket is risky. Business owners have the majority of their wealth invested in their own business.

The idea of having more wealth invested in what the business owners know best leads them to concentrate their wealth back into their company. This leads to concentration risk. This specific risk is the type of uncertainty that comes with the company or industry they are invested in. In the case of business owners, this is quite high.

The risk can be reduced through diversification, such as taking exposures across other industries. That is where a wealth manager becomes important.

It’s possible to diversify the long-term wealth preservation for your family by taking some money out of the business in a disciplined, mechanical way. By keeping money aside, Mr. Rothschild could handle the risks in the business, but have peace of mind by setting aside a nest egg for the family.

“I recognized that my highest risk was the business,” Mr. Rothschild says. “You do need to reinvest in the business. You do have to put money in the business or it will die. You have to manage that business on a daily basis.

"But it’s also essential to take money for your personal portfolio. I don’t have the time to manage my personal money. I choose people who I trust and they do it well. I made the effort to balance personal wealth and operating company investment. I stayed within my lifestyle, and shared the gains with those around me.”

During the conversation, Mr. Rothschild’s humble, quiet style of leadership stands out, as well as his deep concern and interest in his employees. But as an accountant, he also understands the financial factors driving the restaurant business. 

“My friends thought I was crazy, as I did take on personal debt at a time when I was set up with my home and family and my career was stable."

"Buying a business was seen as financially risky but it has been an adventure worth living.”

Published in "The Globe and Mail," August 12, 2014. 

Jacoline Loewen is the director of business development of UBS Bank (Canada). She has over 25 years of experience in finance for high-achieving entrepreneurs and family businesses. She specializes in the transition from business to sudden wealth from sale of a business and the impact on the Founder, their family, inter-generational wealth transfer and philanthropy. Prior to joining UBS Bank, Ms. Loewen specialized in finance, specifically sales and acquisitions, successions and private equity financing.

Ms. Loewen has authored numerous best-seller books such as, Money Magnet: How to Attract Investors to Your Business, Business e-Volution and The Power of Strategy. She is a guest columnist to the Globe & Mail and contributor to the National Post, Thomson Reuter, Profit and was a regular panellist on BNN: The Pitch. In 2018, Ms. Loewen was awarded #1 Forecast for Markets and Stocks by The Ticker Club Annual Forecast. She is ranked # 6 in the Top 100 Family Business Influencers on social media and awarded Top 50 Board Diversity.  She is on a director on the Toronto Atmospheric Fund board and investment committee, Chair of the OCAD University business catalyst advisory board, as well as  former  director  on  the  Private  Capital  Market  Association   board.

You can follow her on Twitter @jacolineloewen Contact: 416-662-1930 or jacoline.loewen@ubs.com.

Financial performance of family-owned companies is superior

Usually family and business blends are developed in countries where there is low trust. As Western countries have law and order to ensure corporations work well, family businesses are less in demand. Those that do work and get passed to the next generation properly, tend to do exceptionally well.

The de Gaspe Beaubien family is a great example where the next Gen. were able to influence the sale of the original business that made the wealth. Now the next Gen. is re-inventing the family business to the next level.

Here are a few excerpts from a Globe article talking about some of the questions to ask to achieve a strong and positive family business:

BRENDA BOUWSPECIAL TO THE GLOBE AND MAILAPRIL 29, 2018

While there’s an old adage that says never go into business with family (or friends), experts say the corporate pairing of relatives can be powerful, if properly handled. A recent​ report ​of 1,000 family-owned firms worldwide​​, including some in Canada,​ showed the financial performance of family-owned companies is superior to that of non-family-owned businesses. Family-owned companies generated a cumulative return of 126 per cent since the start of 2006. Revenue and earning growth (measured by earnings before interest, taxes, depreciation and amortization, or EBITDA) was stronger, EBITDA margins were higher and cash flow returns are better, the report said, adding that family-owned businesses​ have a “longer-term and conservative focus.”​

A well-known example many experts point to is consumer products conglomerate SC Johnson, now being run by the fifth-generation of the Johnson family. It even uses the slogan “A Family Company,” to help boost its brand.

“When an entrepreneurial family gets together to work on something, they care so much more than someone who doesn’t have their name on the building or doesn’t have a stake in the community. To me, that’s a recipe for building a great business,” says David Simpson, head of the Business Families Centre at Western University’s Ivey School of Business. “However, when it goes poorly, it goes poorly doubled down because you’re losing your brother or sister or cousin.”

“There’s an intrinsic conflict that comes with family businesses,” says Mark Barnicutt, co-founder and CEO of HighView Financial Group, which works with high-net-worth families, many of whom are entrepreneurs with their own companies.

“Emotional issues easily come to the surface,” he says. The most successful family businesses recognize that could happen and put in place the proper governance, including family roles and responsibilities, to cover what happens when conflicts arise. “A business isn’t a family and a family isn’t a business. You really need to separate the two,” Mr. Barnicutt says.

Family members in business together should also outline what happens if one person wants out, or there’s a disagreement in direction, Mr. Simpson says.

“It’s unromantic … but a business is an organism that lives, dies and changes,” he says. “Businesses aren’t worth blowing up a family for. A business is just an instrument of economic gain … If you go the nuclear option of suing each other, you’ve hurt both the family and the business.”

Mr. Simpson once ran a business with his younger brother, Craig Simpson, a former National Hockey League player who is now a broadcaster with Hockey Night in Canada. The business relationship ended after his brother retired from hockey and focused more on the company. “We found out that our formerly passive, equal partnership didn’t work as active partners,” Mr. Simpson says. “We didn’t share the same vision, risk tolerance and personal objectives and our general assumption that siblings are of course similar, was surprisingly inaccurate. We were better brothers than business partners.”

Most often, it’s money and corporate strategy – including how various family members are compensated and disagreement over the direction of the company – that lead to family business feuds, says Jane-Michèle Clark, an instructor who teaches the family enterprise course in the entrepreneurship program at York University’s Schulich School of Business.

Ms. Clark recommends business families hold strategy sessions that cover topics such as their family values, how they want the business to work for them and vision for the company.

“When you start by reaffirming the family values and relationship, then get clear about each person’s expectations about what they want the family business to do for them, and then move on to the vision, the conversation takes on a whole different tone,” she says. And while she recommends family businesses bring in a family council or an advisory board “to act as both a resource and a buffer,” few do, believing it’s not necessary or conflict won’t happen in their case.

3 Questions to ask to check your portfolio

The only limit to making impact is your imagination and your commitment. This is why I am proud to being part of a team dedicated to adding more value to investors and their families.

This past month has been interesting, in my role as business development for my team of financial advisers. I have heard the same three questions from prospective clients.

To see if you also share these, I thought I would give a quick answer to these important questions to ask in regards to managing your money:

1. How will you react in a coming correction? 

Most people will tell you they are cool under pressure, yet during a correction in the market, the truth is that many will panic and do the worst thing – sell at the wrong time. Selling is exactly what you should not do and this fear over common market occurrences is probably the number one reason you should partner with an expert to manage your wealth. They protect you from your own psychology.  The past years have been smooth sailing where most could have made money but what about when the correction arrives - and it will arrive. Talk to your adviser about an upcoming correction and how are you protected from the downside.

2.Are you overpaying for performance? 

It is no longer about the fees. In fact, it is about the economics. Do you understand the business model of a broker versus the Financial Adviser being rewarded to advise you to achieve your goals? What would you do if you had your doctor prescribing treatments where he got a kick back from the drug company? That is the broker model, which I believe is flawed, and people are realizing the economics are set up to reward the house, not the client. Ask your adviser for the economics of your portfolio. Are they able to source investments outside of their institution? How are they paid? Ask if they earn an additional fee when you accept their recommendation.

Does your adviser have conflicts of interest? 

Again, the broker model is set up to reward the broker, not you, the investor. If your financial adviser is pressuring you to trade often and to buy their own products, rather than offer an open-house architecture, your long term financial outcome will be compromised. Is your broker stuck selling you their in-house products or do they have a global diversification and product diversification capability at minimal cost?

Visit Amazon Author page for Jacoline Loewen. Click here.

Money Magnet, by Jacoline Loewen

Is it better for company boards to have at least one director educated in board governance?

It is an honour to be part of the Rotman graduating class for the Directors Education Program, 2018.
The experience was top quality and I come away from the intense experience knowing a great deal more than when I started, despite having served on many boards.

The Rotman DEP assembled a great class of individuals and I valued the group work done with each of these terrific people. Rotman puts together a professional post in the newspaper to celebrate all the hard work, along with the message below.

ICD - D Rotman Graduating Class - Jacoline Loewen

"Congratulations, You have completed the ICD-Rotman Directors Education Program (DEP), and are a part of the 72^nd DEP, Toronto. "

"To recognize your achievement, the ICD ran a full page graduation advertisement in The Globe & Mail today. For your convenience, the ad has also been posted on the ICD website, available here"

The time invested in this program run by top academics and practitioners does yield much worth. I believe it will benefit the Canadian economy as the expertise flows through to publicly traded corporations, in particular.

Too many of these boards are appointed by the CEO or Founder which makes them far too docile. Many directors believe their prime role is governance and do not contribute towards the strategy.

Also, many directors believe their allegiance is to the person who hired them to the board, too often the CEO or Founder. Hopefully, Canadian companies will benefit from all this terrific business acumen.

Two steps to reduce complexity in performing a valuation

I was listening to Tom Deans, writer or Every Families Business and a good friend of mine, talk about how Founders of businesses transition from business owner to sale of business - to an outside buyer or to their family. One of the best practices recommended by Tom is to get a realistic valuation of the business. Tom recommends to do this years before any form of sale or succession.

To get a realistic understanding of the value of the business, here is an overview of how to get a rough estimate that you can do yourself:

While firstly, revenue and secondly, profit are obviously two key factors in determining your company’s worth, assessing them in a vacuum simply won’t result in an accurate valuation. Even the additional details you provide regarding the number of customers you served during the previous two years simply don’t amount to sufficient data to perform a reliable valuation.

What you have to remember is that any investor, regardless of the reason for the interest in your company, will not be satisfied with a “ballpark” estimate of your value. They will delve deep into every aspect of your business when performing their due diligence in this regard and so should you.

To give you an idea of the complexity involved in performing a valuation, allow me to describe the process:.

1) EBITDA

Firstly, we will establish the company’s Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) or Seller Discretionary Earnings (SDE).

EBITDA is used mostly for companies valued at over $5M and is calculated by adding interest, taxes, depreciation and amortization back to your net income.

For companies valued at under $5M, Seller Discretionary Earnings (SDE) is typically used. SDE is the profit left to the business owner after the costs of all goods sold as well as critical operating expenses have been subtracted from gross income. Importantly, the owner’s salary can also be added back to the profit to reflect the true earnings power of the business.

SDE can be calculated using the following formula:

2) The Multiple Applied

The second step of the valuation process is to calculate the multiple that is applied to the EBITDA or SDE figure.

There can be between 80 and 100 data points into consideration when conducting this comprehensive investigation. Here is a small extract from the checklist of factors that we delve into:

Niche

• What level of threat does established competitors pose?
• Are there any expansion options available within the company’s niche?
• Is the niche evergreen?

Operations

• What level of technical know-how is required to manage the business?
• How are current staff members and contractors managed?
• What standard operating procedures (SOPs) in place?

Financials

• How has the gross and net income been trending for the past 1 - 3 years?
• How stable is the company’s earning power?
• Are there any anomalies in the business’ financial history and can they be explained?

Customer base

• What is the customer churn rate and lifetime value?
• How much does it cost to acquire a new customer?
• Why is the business losing customers?

Traffic

• Are current referral programs effective and sustainable?
• How effective and secure are current search engine rankings?
• Has the site been affected by any Google algorithm changes or manual penalties?

Other

• Are there any specific locational responsibilities or physical assets with the business?
• Are there any licensing requirements in order to run the business?
• Is the company’s intellectual property (IP) protected?

This investigation and research process leads us to an eventual multiple figure that we apply to the EBITDA or SDE value to establish your company’s value.

Typically, this falls between the 2.5x to 4.0x range, although there are exceptions to both sides of this spectrum.

Investigating these factors is dependent not only on a significant amount of experience in the M&A industry, but also on having the time and capacity to perform all the necessary research.

You can get more information on the valuation process by reading the full article at the website of FI International  - this article.

Jacoline Loewen on Twitter @jacolineloewen 

Investing and saving yourself from your emotions

As the stock market bumps along, there is a rising noise of worried analysts saying it is time to liquidate. 

One of the wealthiest, self made men is Ray Dalio, a leading Hedge Fund expert and author of Principles. Ray says one of the top three objectives of investing is to save yourself from your own psychological impulses. When the market goes down it is called a falling knife and many try to catch it by selling out. They forget their long term goals and give in to their fear.

"While we all tend to be emotional about money, we're far better off when we approach long-term investment strategy from a cool and rational perspective," Ray says. "Letting emotions influence our investing decisions can often lead us to lose opportunities and result in decisions we'll regret in the long term," he added.

Getting Caught Up in the Excitement

With stock markets continuing one of their longest bull runs in history, despite some recent whipsaw movements, it's hard to avoid getting caught up in the excitement. There's no shortage of tales of overnight success as certain hot investments skyrocket, which for some makes it seem like a great idea to jump on the bandwagon. Same goes for getting caught in panic mode and maybe selling prematurely when markets turn. Investing can be a roller coaster of emotions.

Goal-based investing helps to keep you going down that river and to survive the big waterfalls. Ray Dalio should know. He is the 13th richest person in the world (recorded).

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