China will boost your bottom line

Guest Blogger this week is Dr. Michael Power, Strategist for Investec Bank, South Africa, who is on the left of the photograph. Dr. Power predicted the housing bubble popping to the exact month. I think he was so clear headed because he is not situated in North America and is not as biased by the driving wish to see economic growth return to the Western World. Here he talks about the need to be in the Chinese market. Private equity knows this but it is good to get reminded. Check out Dr. Power:

My forecast for the various parts of the global economy can be summarised as follows: the closer your economy is integrated to the Chinese economy, the more V-shaped your recovery is likely to be. The corollary of this is that the further away – broadly speaking, the more Western-oriented – your economy is from China, the more leaden-footed its recovery will be. That said, because of the base effects of Q4 ’08/Q1 ‘09, year-on-year GDP growth in Q4 ’09/Q1 ‘10 will show significant improvement in Western GDP growth patterns. But this uptick will flatter to deceive and thus be something of a false dawn: the balance of 2010 will show that the underlying GDP growth profile of the West will remain lacklustre and that the real recovery will have to wait for 2011 and beyond. In short, the West’s recovery letter will more likely be a ‘W’. How ironic yet appropriate that the Dubya era will sign off with a period of Dubya-shaped economic growth!
And, off in the far distance, there is a second debate coalescing along the lines of “Even if the US does have to endure a W-shaped recovery, just how robust will that final up-leg be?” The fear is that it might not be the incline of a steep hill but rather that of a gentle slope. Furthermore, the fear is that the new trend GDP growth rate it will gravitate towards will be materially lower than the old, pre-2008 level of 3.0% to 3.5%; 2.0% trend is the whispered number. If so, then perhaps the US (and most likely most of the West with it) is indeed turning Japanese.
You can reach Dr. Power at his email address - michael.power at investecmail.com

Building Canada - one business at a time

Here's an email that inspires me.

Dear Jacoline:
As previously indicated, here is proof of the value of your book. Cheers! Rolf Eichfuss.

(Rolf features in Money Magnet and he is tireless in his quest to help Canadian entrepreneurs.)

Hello Rolf,
I am will be returning your copy of "Money Magnet" to you tomorrow. I used temporary markers to highlight useful sections of the book. As you can see from the attached photos, I pretty much covered the whole book.

What the heck is an exit strategy?

Leading business owners use Exit Strategy to make better decisions for the long-term value of their enterprise.As a business owner, the long term legacy of your company should be a fairly important consideration. Yet, according to a Queens University SME study, an astonishing 82% of owners do not have an exit strategy. In other words, only 18% of CEOs have planned how to get out of their company with a cash payment. The others are doing what comes naturally – waiting until retirement creeps up or is forced.

The “exit” from the business does not have to be a sale either. A business owner has the choice of inviting in private equity investors to buy half the business, allowing them to take some chips off the table to invest in RIM or a cottage. Before involving investors, do think about what companies out there might like to buy your business and why. Otherwise, the lack of a solid exit strategy demonstrating how investors can recoup their initial investment can turn off potential suitors with cash.
From Wishful Thinking to Reality
I guess it is natural that entrepreneurs who tend to rely on the old hit-and-miss, fly by the seat-of-the-pants approach of dealing with other parts of business put off their exit strategy. Tragically, this means that all the blood, sweat and tears shed by the entrepreneur in her business could fade away into oblivion without much value. With a bit of decision making today, however, the smart entrepreneur can maximize the return for her hard work.
An Exit Date Forces Action
Close your office door, get out a pen and paper and write down the exact date and strategy of your exit, it may be 5 years or 10, and state if you would be selling to a competitor or having your daughter take over. The specific details and timing are not important – it is the psychological power of having a date and a rough plan that will wake you up to the fact that one day you need to exit your business. A written plan and potential exit date will assist your management team and advisors in a course of action.
Example:
With a long view to the finish line, a good tax accountant will be able to assist you with minimizing your taxes. Maybe you will not reach that dreamed level of the IPO, but you can be assured you will be further along in organizing for the best sale value.
Put the Focus on Talent
Identifying a destination date also deals with one of the most common problems of successful entrepreneurs - ensuring the company can operate without them. Too many business leaders cannot step away from the business without it falling apart, which only reduces the value of their company. This common trap of micromanaging squashes the development of management skills as human beings learn from making decisions and mistakes. With an exit date fixed, the gaps in talent will become obvious, encouraging owners to deal with issues sooner than later.
It is a common observation that children of entrepreneurs are often overshadowed by the owner/parent. If you are interested in passing your business to your children, the setting of an exit date would encourage an earlier transition.
Example:
An exit date delivers a clear path for the next generation, showing the opportunity, instead of a vague promise of “Someday all this will be yours…or your brother’s.” Once family members are let in on the timeframe, the dynamics will change rapidly and entrepreneurs may be surprised at who steps forward with an interest in taking over the reins. The second generation can trust that there is a role for them and begin to take more risks, learning from mistakes while the expertise of the founder is still easily accessible.
Link the Personal and the Business
When you own your own business, personal issues are closely linked to with the business and, for true success, you need to manage both. By sharing your vision for the business with your spouse and children, family members will get a better grasp of the legacy you want to create. They will become more accommodating about the amount of time you are devoting to work once they know your time frame to leave the business.
You can also get your personal life more co-ordinated. Perhaps it is time to buy that smaller home in the location your spouse always dreamed about and get the new life going. Too many owners sell their business and then experience a massive shock from loss of a huge part of their lives. (Spouses also suffer!)
Call your doctor and make the time to have your annual medical tests. This may seem an obvious statement that has nothing to do with exit strategy, but your health impacts on the business and you should catch problems early. Do your family a favour and keep informed about your health as it affects their life too.
Example:
Remember that bumps in the road can change plans in a dramatic way but, with an exit date set earlier, management can be the little bit more prepared. Being diagnosed with cancer can move your sell point or ‘access point’ from five years to three months. If you prepare for an exit within five years time, even as a simple exercise, you can reduce stress at a time when your family needs you the most.
Know your Role in your Business
Michael Gerber, author of The Entrepreneurial Myth, says too many entrepreneurs are looking down at their desk when they should be looking outwards for new opportunities. Your job as the owner is to work on the business, not in the business.
Ask yourself if you are one of those business owners who prefer to focus on building the profit and cash flow? Be warned - this is tactical. Instead, you should be overseeing the managers and not doing the work.
Push the Vision to Produce Results
Golfing with the girls or sailing at Muskoka can inspire flashes of brilliance on how to improve the value of your business. It is astonishing how many business owners tell potential buyers what would boost the worth of the business considerably, but have not executed these clever ideas themselves. Don’t wait for someone else to make money on your vision - do the activities now that you know will add value to the bottom line. When you have an exit date, you will be surprised at how it turns up the heat psychologically to get more done. Maybe you postpone a golf game or two, but in the time frame of your exit strategy, the pay-off will be very worthwhile.
Example:
If you are imagining an IPO in five years, you will see the tremendous growth required to achieve this goal. Perhaps you will look at other options such as merger, buy-out or franchising.
In summary, with short term vision, it is no wonder that many businesses struggle to get the recognition and financial backing they richly deserve. An exit strategy can make sure you do retire rich, and surely that is worth a little bit of effort now?
Jacoline Loewen is an experienced business advisor, lecturer and writer who raises capital for growth companies. Her latest book is Money Magnet, Attract Investors to Your Business.

Are we the new Japan?

This fellow worked for the big banks, including Bank of Montreal, lost his job and started a blog. He is now #3 most popular blog on the Internet. Google invited him to give a talk on his contrary view of the economy which is the topic of his blog. I got this link from a terrific newsletter by Clemens Kownatzki at http://fxinvestmentstrategies.blogspot.com/
Here is Mike Shedlock's presentation at Google Tech Talk May 6, 2009.
http://www.youtube.com/watch?v=1YKc0UolTqE

Private equity sees reality and adapts

Just as America attracted the world's aggressive investment money last century (away from Britain) the Chinese economy is busy attracting the world's currently available investment money and is seen as the lushest place for future steep growth.
I know British fellows who have still not accepted the decline of their Empire and I suspect it will be as painful for the American money experts to believe this new reality.
A finance strategist from London told me that he has a terrific presentation showing the movement of money supporting this theme, but was instructed by his senior manager "not to show it to the American clients as it would upset them too much."
Private equity is already nimble and investing in companies working with BRIC countries. That means even less money for the public markets and more money staying in private hands.
Jacoline Loewen sources private equity for companies that want to grow.

We are Entrepreneurs

I am not that comfortable talking about women entrepreneurs and business, as each woman's experience is so diverse. I can only speak from a financing perspective for women, where success comes from the ability to get the cash flow to grow the business aggressively.

Last night, I was delighted to speak to a room full of dynamic business women at the Ivey Women's Entrepreneur Club organized by Eva Szymanski, Maven Events, and was very impressed with their lively discussion. It helped that the feisty Sarah Thomson, publisher of Women's Post gave quick feedback based on her experience in building an online community for smart women. I was reminded of Jim Balsillie, RIM, who berated entrepreneurs at a conference for not asking questions fast and aggressively enough. "Guys," he said, "If I was in New York, people would be lining up to get the microphone. Come on, switch onto hyper drive." No trouble with these women entrepreneurs at Ivey - they were firing questions and sharing business problems like crazy.

"Companies need to do brand and growth strategy. With my love of sports," Marysia Czarsky of Velocity Partnerships told me, "I help companies get competing." Looking at Marysia's energy, I could see how she brings that to her clients. Reflecting on the evening, it was great to spend time with a large room of competitive women like Marysia. I do beleive that a tipping point is being reached here in Canada, where we do not have to be concerned about being a woman, we just have to love being an entrepreneur.

Another reason private equity is better than public money

Do you remember those economic books in the Nineties raising the alarm that the economy was not being calculated correctly because economists were still measuring carbon paper for typewriters and not paying attention to computer chips or the Internet?

I think the Dow is still caught up in that time warp.

Consider this. The Dow board decided that Travelers Companies Inc. (TRV) and Cisco Systems Inc. (CSCO) should get included in the Dow - only this month. As for GM and Citigroup, they have finally been given the heave-ho out of the index. GM has been part of the index since 1925 but after declaring bankruptcy this week, it would be shocking to say the least, for it to maintain its status within the index. Citigroup was also removed and quite right too, with its US government stake in the company. Why did it take so long?
Everyone knows the Dow as the oldest and most quoted index when it comes to financial markets. You may have also heard that the index is a weighted average of stock prices of its 30 components. What is not well known however are the criteria for selecting the component stocks that go into the index. As a matter of fact, I have no idea what the exact criteria are and would love to learn (if you do know can you email me?). We do know that the Dow Jones editorial board makes the final decision on which components to select.
Here's what really bothers me. This is why I question the public markets. When you consider the immense power that this editorial board has by making such a selection, it makes me wonder just how good a reflection of the true economy lies in the Dow and why it's still such an important barometer for the general public. More importantly, could there be any conflicts of interest in the selection process?

Break through the bear market line

The USA's Standard & Poor 500 broke through the 200 day moving average (blue line). Where the chart would normally indicate a break through of the bear market, after this last year we know not to expect anything.

As Niall Ferguson, author of Ascent of Money, latest article comments: expect the unexpected.

Advice for women entrepreneurs on ins and outs of financing

Financing entrepreneurial ventures is always a tough sell, but in today’s bleak economy the task is even more difficult.
However, understanding of the ins and outs of financing goes a long way in increasing the chances of success.
At an upcoming Ivey Women Entrepreneurs Connect event, experienced entrepreneurs and finance specialists will share their expertise and concerns related to business financing.
The event takes place Wednesday, June 10 starting at 6 p.m. at Verity Club in Toronto.
Organized by the Richard Ivey School of Business and KPMG Enterprise, the session will open with a presentation by Jacoline Loewen, Partner with Loewen & Partners Inc. and a best-selling author, on venture financing and what options and strategies to consider to find the best financing fit. A private equity expert, Loewen has raised more than $100 million for companies and shares her insights in her latest book Money Magnet: How to Attract Investors to Your Business.
A panel session will follow with Sarah (Whatmough) Thomson, Founder and President of Women’s Post; Colleen Falls, Senior Vice President of KPMG Corporate Finance and Jen Kluger, Co-Founder of Foxy Originals, a Toronto-based jewelry design company. Beth Wilson, Canadian Managing Partner with KPMG Enterprise, will moderate the panel.
“Economic conditions may have changed the investment environment, yet history has shown that many successful businesses are born in recessionary times so it’s well worth pursuing an entrepreneurial vision,” said Stewart Thornhill, Executive Director, Pierre L. Morrissette Institute for Entrepreneurship at Ivey Business School. “The best way to manoeuvre in this challenging landscape is to broaden your knowledge and contact base.”
Event: Ivey Women Entrepreneurs Connect (including cocktail reception & networking)
Date: Wednesday, June 10
Time: 6-9 p.m.
Location: Verity Club, 111-D Queen Street East, Toronto, Ontario
To purchase tickets, please contact Ellen Brown at 519-661-4236, mailto:embrown@ivey.uwo.caor click here: Purchase tickets
Media interested in attending, please contact Dawn Milne, 519-850-2536, dmilne@ivey.ca About the Richard Ivey School of Business, The University of Western Ontario The Richard Ivey School of Business at The University of Western Ontario (http://www.ivey.ca/default.htm) offers undergraduate (HBA) and graduate (MBA, Executive MBA and PhD) degree programs in addition to non-degree Executive Development programs. Ivey has campuses in London

An Entrepreneur who made it to the other side

It is inspiring to listen to entrepreneurs who have succeeded in taking their idea from start up, over the chasm and managed to get to the other side. Their stories can teach other early stage entrepreneurs a great deal but also inspire them to take the risks to get to the other side.

Ron Close is such an entrepreneur. He sold his company to AT&T and is now sharing his lessons with Ivey MBA students and MaRS entrepreneurs.
When you hear Ron's comments on how he lead his company through the ups and downs, it becomes clear that he was always someone who cared very strongly about the people. I particularly liked his comment that he knew his staff were smart and would act if given the information. It is tough being a boss but believing your staff might be able to surprise you means that they will - and often.

It is great to see nice guys finish first. Thanks, Ron.

To Listen to Entrepreneurship, Ron Close, MaRS, Ivey: Financial Post Executive.

Do check out the MaRS blog and Twitter.