I admire the CEO of 85 Broads, Janet Hanson and was delighted when one of my brilliant team members, Winnie Chou, sent me this article on Janet.
Her comments on putting family and relationships at the same level as their career would have been chum to the sharks backin the Ninties. I am so glad to see someone being honest about how family and love are important. As Janet puts it, "She did not want to be someone's rich aunt." It shows that the choices for women can be managed because Janet is her daughter's rich mum! Shows that it can be OK to seek happiness.
Janet's a Columbia MBA, the first woman in Goldman Sachs' history promoted to sales management, founder of a $3B asset management fund, a published author, philanthropist, mother and more.
You can also read Janet's Q&A in full on The Doostang Blog.
Here's a quick summary:
Tell us about 85 Broads and why you started it. I set out to solve a problem.
When I left Goldman Sachs in 1993, I was leaving the world I had known and loved for 14 years to stay at home with my two young children. I wanted to know what the markets were doing, I wanted to be “in the game” but instead I was at home wishing I wasn’t. I founded 85 Broads (which is a humorous play on Goldman’s street address in Manhattan) to re-establish a connection between women who were “alumnae” of the firm with women who were still in the building. You have had a very successful career in finance.
Can you elaborate on your decision to go into that field, and give us perspective on that choice?
I won the career lottery after I graduated from Columbia Business School at the age of 24 – I became an associate in the Fixed Income Division at Goldman Sachs. It was just an amazing time to be at the firm. Being in Fixed Income Sales played to my competitive strengths – I thrived because I was challenged every single day to push myself. It was incredibly hard work but it was also incredibly rewarding. The 2-year investment banking stint as we know it isn't a pervasive option for top grads today. What advice do you have for members who are facing this tumultuous job market early in their careers? My best advice: be willing to really push yourself – whether you’re doing a 2-year stint with Teach For America or 2 years as a banking analyst, this is how young people can truly differentiate themselves. If you can figure out how to live and breathe the company’s “mission,” you will earn the respect of the people who hired you and invested in you. And lastly, when you’re young, if you do nothing else, figure out how to leverage your college alumni network. That is the single best resource you have and it’s free. Like you, many of our members have elected to further their education with an MBA.
Women have made strides in business thanks to trailblazers like you. What advice would you give to the high-achieving women on Doostang who hold career success as a core value?
We have a favorite expression: “read the ending first.” Being driven in your career is great as long as you have your eye on what else will be critical to your happiness 5 or 10 years down the road. I left Goldman Sachs when I was 35 because I had no social life whatsoever. I was on track to be made a partner within a year or two. I left the firm just as my career was going into high gear so that I could concentrate on how to be in a successful relationship as well as have a successful career. Five months after I left, I came back to Goldman in a part-time job in Personnel. My friends thought I was absolutely insane. But less than a year later, I married Jeff Hanson, who I worked with in Personnel. Even though he wasn’t a “big hitter” by Goldman standards, he was brilliant and fun and we built an amazing life together. I left Goldman Sachs because I didn’t want to just be someone’s rich aunt,! I wanted to have a family AND a successful career. My approach was a bit unconventional but it worked – Meredith and Chris Hanson are the loves of my life. They are the reason I’m still happily “in the game.” Bottom line, I had the guts to know that to be happy I needed a successful career AND a great family. That is not work/life balance. That is work/life optimization.
What are some common mistakes you've observed in interacting with top grads just starting out, as well as the hiring managers who recruit them?
It is critical to figure out how to relate to young people – the smartest thing a hiring manager can do is solicit candid feedback from the young people they hire. These kids are absolutely whip smart. They are the best educated, best traveled generation ever. And they learn fast so it’s imperative for managers to keep them intellectually engaged and motivated. That is their single biggest challenge.
In a recent interview for the Huffington Post, you talk about "reading the ending first" in job search. What does this mean for our members who are actively looking for new opportunities?
It means acquire real skills which will make you eminently more qualified. If I was a young person today I would want to have killer computer skills so that I could analyze data and information better and faster. That doesn’t mean you have to be a programmer. It means knowing how to use technology to your greatest advantage. Anyone over 40 years old is probably not that familiar with how to use SEO or the newest social media tools which could give their companies or organizations a real competitive advantage. Young people, if they’re smart, will use this “edge” to make themselves invaluable in any career path. Older people are at a severe disadvantage which young people can exploit (in a nice way). That is a co-mentoring opportunity if there ever was one.
What does career management mean to you?
I will always be grateful to Nancy Reagan. When she was First Lady, she was asked by the press how she would tell young people to steer clear of drugs. Her answer: “just say no.” She was derided in the press for that rather simplistic response but guess what – saying “no” is actually one of the most important skills you need to master in order to have any semblance of happiness – particularly as you get older and are likely juggling career and family responsibilities. Jeff and I launched Milestone Capital so we could spend more time with our kids and have complete control of our own destiny. We worked like absolute dogs but we never looked back. In 2004, I left Milestone and went to work for Lehman Brothers to hedge our downside risk if our business started to falter. But as everyone knows, stuff happens. That and there are no guarantees in life. If I had to do it all over again, I would have banked! a lot more of my income from Goldman which would have given me many more options down the road.
To read more:
July 29, 2009
But You Knew This Already...
Inflation beaters - Canada rocks
A reality is that politicians are seldom courageous enough to run on a platform of raising taxes to reduce deficits and pay down debt ─ and almost certainly not now.Much easier to pay lip service to debt and deficit reduction at a price of inflated money supplies and tolerable inflation; in other words, to monetize the debt. However, the risk in this approach is of inflation getting out of hand, and in the extreme becoming hyper-inflation.
In historical terms the catastrophic collapse of Weimar Germany wasn’t all that long ago. Earlier this year, Zimbabwe, another hyper-inflated country, got to printing bank notes in denominations of up to one hundred trillion dollars, worth about US $30 at the time.
(As a side note, when I left Zimbabwe thirty years ago, I got two US dollars for every Zim dollar - Jacoline Loewen).
Imagine how China would feel if it’s estimated $2 trillion worth of U.S. Treasury bonds (purchased to help the U.S. fund its massive trade deficits) were redeemed in a currency debased anything like this. If there is one thing we should have come to realize it is that the Chinese are no pushovers.
Of course, something this extreme couldn’t conceivably happen. Nor should it, given the U.S. economy’s famed entrepreneurial drive and its enviable record of adjusting to new economic circumstances and growing afresh. Warren Buffett is one who believes America’s best days could yet lie ahead now that it is confronting its challenges “with knowledge”. I especially liked his latter reference, also having long learned never to sell an irrepressible America too short.
A much more palatable, middle-of-the-road option for debt and deficit-strapped governments would be to boost the productive capability of their economies. If inflation is defined as too much money chasing too few goods and services, and economies everywhere are awash with stimulus and deficit money, why not raise the output of goods and services to balance the two better. This way there would also be a cap on prices – and on inflation. The way to achieve this better balance? Encourage cost-saving, productivity-enhancing investment in new plant, equipment, systems, infrastructure – in everything!
In his admirable work, John Aitkens, investment strategist at TD Newcrest, sees a half-speed economic recovery accompanied by a full-speed boost in productivity. He reminds that when this happens the bottom-line impact on corporate profits can be tremendous.
Clearly, the greater the debt and deficit burdens, the greater the inflation threat. The IMF debt-to-GDP danger benchmark is 60%. In Britain and Japan this ratio is already at or close to 100%, in the US approaching 80%. In Canada by comparison it should remain in the low 30% range even allowing for the increased deficit-funding debt issues to come.
Unlike most other G8 and OECD members, Canada did save for a rainy day by using that string of past budget surpluses to pay our national debt a long way down. Not too many years ago we too had exceeded that dangerous 60% high water marker, but no longer.
Of course, something this extreme couldn’t conceivably happen. Nor should it, given the U.S. economy’s famed entrepreneurial drive and its enviable record of adjusting to new economic circumstances and growing afresh. Warren Buffett is one who believes America’s best days could yet lie ahead now that it is confronting its challenges “with knowledge”. I especially liked his latter reference, also having long learned never to sell an irrepressible America too short.
A much more palatable, middle-of-the-road option for debt and deficit-strapped governments would be to boost the productive capability of their economies. If inflation is defined as too much money chasing too few goods and services, and economies everywhere are awash with stimulus and deficit money, why not raise the output of goods and services to balance the two better. This way there would also be a cap on prices – and on inflation. The way to achieve this better balance? Encourage cost-saving, productivity-enhancing investment in new plant, equipment, systems, infrastructure – in everything!
In his admirable work, John Aitkens, investment strategist at TD Newcrest, sees a half-speed economic recovery accompanied by a full-speed boost in productivity. He reminds that when this happens the bottom-line impact on corporate profits can be tremendous.
Clearly, the greater the debt and deficit burdens, the greater the inflation threat. The IMF debt-to-GDP danger benchmark is 60%. In Britain and Japan this ratio is already at or close to 100%, in the US approaching 80%. In Canada by comparison it should remain in the low 30% range even allowing for the increased deficit-funding debt issues to come.
Unlike most other G8 and OECD members, Canada did save for a rainy day by using that string of past budget surpluses to pay our national debt a long way down. Not too many years ago we too had exceeded that dangerous 60% high water marker, but no longer.
Thank you, Paul Martin!
Canada’s continuing relative fiscal strength cannot be over-emphasized. Where a U.S. budget deficit of $ 2 trillion would be 13% of GDP, Canada’s at $50 billion will be closer to 3%. The same with the respective national debt burdens - theirs 80%, ours 35%. For this reason alone a resurgent Canadian dollar represents a problem of strength (not of weakness), despite the shorter-term pressures it is putting on our manufacturers and exporters.
Canada’s continuing relative fiscal strength cannot be over-emphasized. Where a U.S. budget deficit of $ 2 trillion would be 13% of GDP, Canada’s at $50 billion will be closer to 3%. The same with the respective national debt burdens - theirs 80%, ours 35%. For this reason alone a resurgent Canadian dollar represents a problem of strength (not of weakness), despite the shorter-term pressures it is putting on our manufacturers and exporters.
Ivey gets entrepreneurs beyond the classroom
Running a company takes a wide lense view of a business. Some business owners get a company passed down to them from their parents through succession planning while others start one themselves. "One in three dreams becomes a reality," says Karen Mazurkewich in the Financial Post.
Ricky Zhang, an MBA student at University of Western Ontario's Richard Ivey School of Business, has not yet graduated but he has already launched a financial-services company, Trans-Asia Investment Partners, with a plan to broker deals between Chinese investors and real-estate funds in Canada. Mr. Zhang, a former associate for AIG Global Real Estate Investment Corp., formulated a plan before starting classes in London, Ont., but he said school contacts were necessary to get it off the ground.
"The most difficult thing for me was in Canada, no one trusted me. I have no relatives here, so the school alumni is the only assets I could rely on initially," he said.
Mr. Zhang spent months in the classroom honing the plan. He and his team have identified two sources of revenue: Chinese investors who will pay his company a consulting fee and developers and fund managers in Canada who will pay referral fees and have lined up contacts with immigration agencies and foreign-study consultants.
Ricky had Ron Close to help him at Ivey:
"A couple of team leaders get religion about their idea and are excited enough to go out and try to raise financing," said Ron Close, a professor of entrepreneurship at Ivey, who helps students find mentors and money. The advantage of incubating a project inside school is that you have the time to work through the angles whereas "most entrepreneurs are winging it," he said. The downside is that some team members view it as an exercise and not a calling.
Ricky Zhang, an MBA student at University of Western Ontario's Richard Ivey School of Business, has not yet graduated but he has already launched a financial-services company, Trans-Asia Investment Partners, with a plan to broker deals between Chinese investors and real-estate funds in Canada. Mr. Zhang, a former associate for AIG Global Real Estate Investment Corp., formulated a plan before starting classes in London, Ont., but he said school contacts were necessary to get it off the ground.
"The most difficult thing for me was in Canada, no one trusted me. I have no relatives here, so the school alumni is the only assets I could rely on initially," he said.
Mr. Zhang spent months in the classroom honing the plan. He and his team have identified two sources of revenue: Chinese investors who will pay his company a consulting fee and developers and fund managers in Canada who will pay referral fees and have lined up contacts with immigration agencies and foreign-study consultants.
Ricky had Ron Close to help him at Ivey:
"A couple of team leaders get religion about their idea and are excited enough to go out and try to raise financing," said Ron Close, a professor of entrepreneurship at Ivey, who helps students find mentors and money. The advantage of incubating a project inside school is that you have the time to work through the angles whereas "most entrepreneurs are winging it," he said. The downside is that some team members view it as an exercise and not a calling.
July 28, 2009
How not to waste your time
I wince every time I think of Peter Lynch’s put-down that if you spent five minutes with an economist you’d be wasting three. But in the summer of 2009, the truth is that no one, no matter how expert (and not even the World Bank), can forecast the future with any real conviction. The stock markets may be forward-looking barometers, but the economic data which they interpret with varying degrees of accuracy at the best of times are of happenings measured weeks or months previously. At this time there is just too much thin ice around for anyone to be foolish enough to stick their neck out too far.
Adding to the unease is a questionable economic recovery to date due solely to government stimulus spending and pump-priming on a pedal-to-the-metal scale as never before.
In other words, a recovery that is heavily induced rather than organic. When and by how much economies will grow of their own volition once they are taken off government life support remains very much open to question.
In turn, this begs the question as to how governments are going to exit their rescue strategies and face up to the twin challenges of the exploding budget deficits and soaring national debts they will have left them with. At some point central banks, too, must start tightening the system by raising interest rates, but then what?
Going into deficit is one thing, even when well-intentioned and necessary. Getting out of the extra deep holes that have been dug this time around will be another. It will be all the more difficult if self-supporting economic recovery is as anaemic as it looks like being in most of the OECD countries.
The BRIC block (Brazil, Russian, India, China) is another matter, as also should be Developing Asia in general. China’s infrastructure stimulus seems to be working well as growth forecasts for the world’s new economic powerhouse are hiked above 7%. The pattern is similar in India, but alas not in our artificially-supported world.
On his recent trip to China, U.S. Treasury Secretary Timothy Geithner was grilled by sceptical audiences on his government’s exit plan. He didn’t elaborate other than to answer there would be a plan , but the time wasn’t yet right. The subject of exit strategies was also raised at the latest G8 finance ministers meeting. After heated discussion, the International Monetary Fund was asked to research strategies to slim budget deficits and reduce government presence in the financial sector in a way that wouldn’t re-ignite a contagious made-in-America crisis that had spread worldwide.
Here in Canada, Prime Minister Harper says tax increases or reductions in program spending won’t be necessary to return to fiscal balance by 2013-14. In which case there would need to be strong and protracted GDP growth. However, many are openly questioning the rosiness of predictions that have been badly discredited since the assurances of last November’s Economic Statement morphed into a projected budget deficit of $34 billion, now further raised to a record $50 billion. Toronto Dominion Bank economists, in particular, maintain that the government’s forecasts are so far off that its cumulative five-year budget deficit projection could in fact turn out to be double the $85 billion forecast.
THEN AND NOW
Given the staggering levels of a U.S. deficit that could climb to the $2 trillion level, or 13% of GDP, it is probably best to assume the U.S. will remain in the red as far as the eye can see. Assuming he remains in office until 2017, Barack Obama could retire as a president who has only known deficits – and massive deficits at that! Similarly in Canada, a safe assumption would be that the red ink continues to flow at both the national and provincial levels until at least the Harper government’s 2013-14 cross-over target date, but probably well beyond that.
What a change in the fiscal “weather” over the past year, and in Canada in a matter of months!
What a far cry, too, from Ronald Reagan’s inaugural declaration that “Government is not the solution to the problem, government is the problem”, and his purported belief that the nine most terrifying words in the English language are: “I’m from the government and I’ve come to help”. This time a government that has come to help is also wielding a big stick, as banks, financial institutions and the automotive industry can feelingly attest to. Just ask AIG, Citigroup and General Motors, who are now also heavily government owned and controlled.
Obamanomics vs. Reaganomics?
Big government is a new fact of life investors will also have no choice but to adapt to. Jeffrey Immelt, the Chief Executive of hard-pressed General Electric, couldn’t have put it more expressively: “The government has moved in next door and it ain’t leaving”.
Our guest blogger is Michael Graham
You can reach Michael at:
Michael Graham Investment Services Inc.
Tel: 416 360-7530 Fax: 416 360-5566
E: Michael@grahamis.ca
www.grahamis.ca
Adding to the unease is a questionable economic recovery to date due solely to government stimulus spending and pump-priming on a pedal-to-the-metal scale as never before.
In other words, a recovery that is heavily induced rather than organic. When and by how much economies will grow of their own volition once they are taken off government life support remains very much open to question.
In turn, this begs the question as to how governments are going to exit their rescue strategies and face up to the twin challenges of the exploding budget deficits and soaring national debts they will have left them with. At some point central banks, too, must start tightening the system by raising interest rates, but then what?
Going into deficit is one thing, even when well-intentioned and necessary. Getting out of the extra deep holes that have been dug this time around will be another. It will be all the more difficult if self-supporting economic recovery is as anaemic as it looks like being in most of the OECD countries.
The BRIC block (Brazil, Russian, India, China) is another matter, as also should be Developing Asia in general. China’s infrastructure stimulus seems to be working well as growth forecasts for the world’s new economic powerhouse are hiked above 7%. The pattern is similar in India, but alas not in our artificially-supported world.
On his recent trip to China, U.S. Treasury Secretary Timothy Geithner was grilled by sceptical audiences on his government’s exit plan. He didn’t elaborate other than to answer there would be a plan , but the time wasn’t yet right. The subject of exit strategies was also raised at the latest G8 finance ministers meeting. After heated discussion, the International Monetary Fund was asked to research strategies to slim budget deficits and reduce government presence in the financial sector in a way that wouldn’t re-ignite a contagious made-in-America crisis that had spread worldwide.
Here in Canada, Prime Minister Harper says tax increases or reductions in program spending won’t be necessary to return to fiscal balance by 2013-14. In which case there would need to be strong and protracted GDP growth. However, many are openly questioning the rosiness of predictions that have been badly discredited since the assurances of last November’s Economic Statement morphed into a projected budget deficit of $34 billion, now further raised to a record $50 billion. Toronto Dominion Bank economists, in particular, maintain that the government’s forecasts are so far off that its cumulative five-year budget deficit projection could in fact turn out to be double the $85 billion forecast.
THEN AND NOW
Given the staggering levels of a U.S. deficit that could climb to the $2 trillion level, or 13% of GDP, it is probably best to assume the U.S. will remain in the red as far as the eye can see. Assuming he remains in office until 2017, Barack Obama could retire as a president who has only known deficits – and massive deficits at that! Similarly in Canada, a safe assumption would be that the red ink continues to flow at both the national and provincial levels until at least the Harper government’s 2013-14 cross-over target date, but probably well beyond that.
What a change in the fiscal “weather” over the past year, and in Canada in a matter of months!
What a far cry, too, from Ronald Reagan’s inaugural declaration that “Government is not the solution to the problem, government is the problem”, and his purported belief that the nine most terrifying words in the English language are: “I’m from the government and I’ve come to help”. This time a government that has come to help is also wielding a big stick, as banks, financial institutions and the automotive industry can feelingly attest to. Just ask AIG, Citigroup and General Motors, who are now also heavily government owned and controlled.
Obamanomics vs. Reaganomics?
Big government is a new fact of life investors will also have no choice but to adapt to. Jeffrey Immelt, the Chief Executive of hard-pressed General Electric, couldn’t have put it more expressively: “The government has moved in next door and it ain’t leaving”.
Our guest blogger is Michael Graham
You can reach Michael at:
Michael Graham Investment Services Inc.
Tel: 416 360-7530 Fax: 416 360-5566
E: Michael@grahamis.ca
www.grahamis.ca
July 27, 2009
A different approach to succession planning in a family business
This week on the BusinessCast, listen to Thomas Deans, a family business owner who sold his multi-million dollar company to a strategic buyer.
Tom is a good friend who I turn to for marketing advice and anything to do with family owned business issues. He has experienced all the fun and craziness of family business that is not always obvious to trusted advisers.
This is why his amusing but also practical book is a must for every lawyer, accountant and or finance expert. It's called 'Every Family's Business'.
If you're in a family firm and thinking of succession matters, this episode is for you. Robert Gold is the interviewer and he is an accountant asking the questions that most advisers do not ask at their peril.
Listen...
Tom is a good friend who I turn to for marketing advice and anything to do with family owned business issues. He has experienced all the fun and craziness of family business that is not always obvious to trusted advisers.
This is why his amusing but also practical book is a must for every lawyer, accountant and or finance expert. It's called 'Every Family's Business'.
If you're in a family firm and thinking of succession matters, this episode is for you. Robert Gold is the interviewer and he is an accountant asking the questions that most advisers do not ask at their peril.
Listen...
July 26, 2009
The Future is Tiny
The future is tiny, says Colin Campbell in MacLean's magazine. Colin tells us that it's not just cars that are getting smaller, it's the companies too.If you think everyone in the auto sector is feeling grim these days, then you haven’t talked to John Vernile. The vice-president of sales at Hyundai Auto Canada says the recent turmoil has been nothing but good news.
Sales for the South Korean automaker are up “in every segment,” he says—amounting to an overall surge in sales of 20 per cent during the first half of this year. “When this downturn hit, it just dialled things up for us,” he says.
Thanks in part to the demand for Hyundai’s smaller cars, the company has suddenly emerged as one of the dominant players, not just in North America but globally. It’s now the fifth-largest carmaker in the world. In quality surveys, it ranks ahead of Toyota and Honda. Market share is up, sales are up, and opportunity abounds. Despite the tough economic times, “we quietly celebrate here,” says Vernile.
In the meantime, I read that GM has put out a Cadillac perfume - tell me that it's not true! Got to keep up to date with the consumers, I suppose. I can just hear marketing: Well, if you can't afford a car, you might as well smell like one...
July 24, 2009
Private Equity Deal Activity Remains Slow
Although US private equity (PE) mergers and acquisitions (M&A) activity is still quiet, PE firms, armed with cash, continue to look for opportunities to invest, according to Ernst & Young LLP's 2009 U.S. PE report (available at: ey.com/us/privateequity). PE participation in minority stake deals is returning after taking a back seat in 2005 through 2007 a period during when mega-deals were in full swing. In addition, government reform in healthcare and financial services may present investment opportunities.
"PE firms are sitting on a large amount of available cash. However, leverage is still almost nonexistent which is hampering deal flow and cash deployment," said Gregg Slager, America's Private Equity Leader at Ernst & Young LLP.
Announced US PE deal volume fell 42% in 2008 compared to 2007. This downward trend has continued into 2009 with 314 transactions announced through May of this year, the lowest five-month volume since 2002 (see data charts at: http://www.ey.com/US/en/Services/Specialty-Services/Private-Equity/Announced-US-PE-Activity).
"The bid-ask spread -- the price buyers are willing to pay and the price sellers are willing to sell -- hasn't narrowed. Until it does, activity will be slow," Slager added.
According to Ernst & Young LLP's 2009 US PE report, although PE firms have historically experienced the best returns from investments made during a down market, PE will be slow in returning to the M&A arena until the credit and capital markets recover.
Read the full article herehttp://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/07-23-2009/0005065044&EDATE=
NEW YORK, July 23 /PRNewswire/ --
"PE firms are sitting on a large amount of available cash. However, leverage is still almost nonexistent which is hampering deal flow and cash deployment," said Gregg Slager, America's Private Equity Leader at Ernst & Young LLP.
Announced US PE deal volume fell 42% in 2008 compared to 2007. This downward trend has continued into 2009 with 314 transactions announced through May of this year, the lowest five-month volume since 2002 (see data charts at: http://www.ey.com/US/en/Services/Specialty-Services/Private-Equity/Announced-US-PE-Activity).
"The bid-ask spread -- the price buyers are willing to pay and the price sellers are willing to sell -- hasn't narrowed. Until it does, activity will be slow," Slager added.
According to Ernst & Young LLP's 2009 US PE report, although PE firms have historically experienced the best returns from investments made during a down market, PE will be slow in returning to the M&A arena until the credit and capital markets recover.
Read the full article herehttp://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/07-23-2009/0005065044&EDATE=
NEW YORK, July 23 /PRNewswire/ --
The economy matters for private equity
I have been following Arnold on Twitter. You know, Arnold, ex-Terminator and now governor of California. He has been sharing his budget pain and what he is trying to negotiate.
California accounts for 10% of the U.S. economy. It's state budget is about $125 billion and the deficit is about $25 billion. By law, California must balance its budget each year and the fiscal year ends June 30. Back in February, the Democrat-controlled legislature could not agree with Republican Governor Arnold Schwarzenegger on spending cuts, but it did agree to put a series of tax increases and borrowing schemes before the voters in a referendum. On May 19, all were defeated. California treasurer Bill Lockyer appealed to Washington for access to bank bailout funds, but he was turned down. He has since warned that the state only has enough cash to meet payrolls until mid-summer. We are all watching.
California matters because of its sheer size on the U.S. economy, and because 49 other governors are watching to see how Washington reacts to its budget crises. State governments are contemplating layoffs, program cuts, tax hikes, facility closures and other such measures all of which will cut in U.S. employment and consumer spending in the third quarter. Over the summer we will learn how these issues play out.
California accounts for 10% of the U.S. economy. It's state budget is about $125 billion and the deficit is about $25 billion. By law, California must balance its budget each year and the fiscal year ends June 30. Back in February, the Democrat-controlled legislature could not agree with Republican Governor Arnold Schwarzenegger on spending cuts, but it did agree to put a series of tax increases and borrowing schemes before the voters in a referendum. On May 19, all were defeated. California treasurer Bill Lockyer appealed to Washington for access to bank bailout funds, but he was turned down. He has since warned that the state only has enough cash to meet payrolls until mid-summer. We are all watching.
California matters because of its sheer size on the U.S. economy, and because 49 other governors are watching to see how Washington reacts to its budget crises. State governments are contemplating layoffs, program cuts, tax hikes, facility closures and other such measures all of which will cut in U.S. employment and consumer spending in the third quarter. Over the summer we will learn how these issues play out.
July 23, 2009
Tips for strategy
As investors evaluate business plans there are certain tests to pass.
No matter the size of company, the first test (besides the people) is around the strategy. One thing I have learnt is that the right strategy is unknowable in advance.
I would far rather see that the company has a strategy to learn, rather than a strategy to implement.
All industries are ripe for disruption and that counts whether it’s banking, computers, brokerage, private equity or even the venture capital industry itself. The odds do favour the incumbent but when a “sustaining” technology is introduced, this has the potential to disrupt the current scene. As private equity fund managers know; disrupter companies can be a great investment.
So what makes a good disrupter? Some are obvious but others, not so much. Here's a quick rule of thumb: If the company’s technology gives skills to a less wealthy and skilled large group of people; it is a good indication that it passes the investor test.
The technology has a higher potential to take hold and gain market share. Now you are talking.
If I were to give some advice to “disrupters” or those wanting to be disrupters, it would be that if a business model seems unattractive to the current dominant players, and clearly is not a sustaining technology to anyone else, then you are cleared for a green light.
Time to go for it!
If you want to ponder more on disruptive strategies, I recommend any of Clayton Christenen's articles.
No matter the size of company, the first test (besides the people) is around the strategy. One thing I have learnt is that the right strategy is unknowable in advance.
I would far rather see that the company has a strategy to learn, rather than a strategy to implement.
All industries are ripe for disruption and that counts whether it’s banking, computers, brokerage, private equity or even the venture capital industry itself. The odds do favour the incumbent but when a “sustaining” technology is introduced, this has the potential to disrupt the current scene. As private equity fund managers know; disrupter companies can be a great investment.
So what makes a good disrupter? Some are obvious but others, not so much. Here's a quick rule of thumb: If the company’s technology gives skills to a less wealthy and skilled large group of people; it is a good indication that it passes the investor test.
The technology has a higher potential to take hold and gain market share. Now you are talking.
If I were to give some advice to “disrupters” or those wanting to be disrupters, it would be that if a business model seems unattractive to the current dominant players, and clearly is not a sustaining technology to anyone else, then you are cleared for a green light.
Time to go for it!
If you want to ponder more on disruptive strategies, I recommend any of Clayton Christenen's articles.
July 21, 2009
Are you naive about the recession's end?
So it's official - The Conference Board reported that the recession is over, but don't be too quick to think everything will be hunky dory, cautions The Gartman Letter:Firstly, however, we shall note that The Conference Board reported its Leaders, Coincidents and Lagging Indicators yesterday, with the former rising 0.7%, almost spot on as had been expected. We note that this was the third month in a row of increases, and historically three consecutive months in a row of advances is the sign that the recession is about to end.
By definition, the “Leaders” lead, and so those reliant solely upon the Board’s Leading Indicators are not prepared to join us in our statement that the recession has ended.
We’re “OK” with that.
More importantly to us, the Board’s Coincident Indicators in June fell modestly, losing 0.2%, while the Laggers fell even more, losing 0.7%. Thus the Ratio of the Coincident to Lagging Indicators rose yet again, not by a material sum, but it rose nonetheless. This is our favourite economic data point, and it has now risen for two months in a row. Historically, it turns “spot on” the turning point of the recession, although it has fired off one or two false signals in the past. However, when the Ratio turns higher coupled with a “spike” downward in weekly jobless claims, the Ratio does a truly spectacular job of telling us that the economy is at its worst levels and that a turn higher is hard upon us.
It has turned higher; that is all we need or wish to know. What we must also remember, however, is that the economic news shall remain horrid for several months yet for we must always remember that the end of the recession means that we are at the nadir of the economy. Things are at their worst at the lows.
More importantly to us, the Board’s Coincident Indicators in June fell modestly, losing 0.2%, while the Laggers fell even more, losing 0.7%. Thus the Ratio of the Coincident to Lagging Indicators rose yet again, not by a material sum, but it rose nonetheless. This is our favourite economic data point, and it has now risen for two months in a row. Historically, it turns “spot on” the turning point of the recession, although it has fired off one or two false signals in the past. However, when the Ratio turns higher coupled with a “spike” downward in weekly jobless claims, the Ratio does a truly spectacular job of telling us that the economy is at its worst levels and that a turn higher is hard upon us.
It has turned higher; that is all we need or wish to know. What we must also remember, however, is that the economic news shall remain horrid for several months yet for we must always remember that the end of the recession means that we are at the nadir of the economy. Things are at their worst at the lows.
Consumer psychology is months, if not a full year, away from turning for the better. Retail sales will look terrible for months; housing sales, although rising from their lows, will still be hundreds of thousands of units in annualised terms below the decent levels of two and three years ago; auto sales will seem horrid in comparison to those of ’05 and ’06 and ’07; unemployment is heading inexorably toward 10% or higher and will continue to rise long into ’10, but the worst is probably upon us now and better numbers lie ahead.
Thus, those who think that just because we have called the recession’s end to be upon us means that we shall see remarkably strong economic data points immediately are naïve and out-of touch historically.
Thanks to Scott Tomenson, Family Wealth Management. You can see more of Scott at http://www.jstomenson.ca/ and also
http://familywealthmanager.blogspot.com/
http://familywealthmanager.blogspot.com/
July 20, 2009
Stories of Private Equity
When the announcer yelled out, “The winner of the Media category, Ernst & Young Entrepreneur of the Year—Somerset Entertainment!” Andy Burgess grinned and bounded up to the stage to collect the award. It all looked so easy to be standing there in a tuxedo waving the trophy, but this moment of appreciation came from painful years of slogging late into the night.
Andy Burgess is one of the owners of Somerset Entertainment, which produces and distributes specialty music to gift stores and other non-traditional retailers using interactive displays where you can push a button and listen to the CDs. They have 28,000 displays in over 18,500 locations that now include mass merchants and specialty stores.
With business and Juno awards filling their shelves, Somerset Entertainment did various acquisitions and moved from $5M in revenues to $11M, until eventually they were achieving $21M in revenues. They bought a distributor and, in 1998, levered up with four flavours of debt: term debt, debt at 17% interest rate, revolving credit, and a vendor take back loan. Then the cracks began to show.
The Buffalo distribution fulfillment center had been shipping comfortably to over 100 different retail points when Andy asked, “Can you do higher volume?” Naturally, they answered, “Yes!” when in fact that was far from the truth. Somerset had been a company with $8M revenues and $2M in EBITDA (earnings before interest, tax, depreciation, and amortization—see glossary) but had grown into the supply chain approach with a distributor turning out to be slow and with the uncanny ability to mess up orders. They would say they had shipped goods—the display case with CDs—and Somerset would then invoice the retailer who, it turnrf out, had not received anything except a bill. It was October—prime pre-holiday selling time with the Christmas season around the corner.
Not good!
American retailers are the toughest sons of guns and were furious at being bamboozled. They told Andy they did not get the goods, but then told him not to bother coming around any more—they were through. Yikes! In one fell swoop, Somerset had gone from being swift deliverers of orders to slow, unreliable duds.
“We hit $36M in sales with $8.5M EBITDA but our debt was at $15M and for the first time, we stressed about breaking covenants. We got a valuation of $15M and, with reluctance, we decided to go with a private equity investment of $21M.”
In hindsight, Andy says getting private equity was good for the owners’ motivation. It took the edge off the worry about money and retirement. “With private equity buying part ownership, we were allowed to take a large chunk out for ourselves straight away but still retain control. I had been working very hard and it was good to get $6M out for the founder and owners.”
The money meant Somerset could pay off their debt straight away and still have $4M to make acquisitions.
Andy says, “With that extra cash, we set up an office in Chicago that has turned out to be the vital springboard into the American market, taking Somerset to the next level. We’ve had a bad year in there, but we did not have to worry about the business blowing up. The peace of mind meant we could focus on battening down the hatches to the storm and finding a new way forward.”
The private equity partners proved to be great sounding boards when Somerset was making acquisitions. The investors were more aggressive in wanting growth but respected Somerset’s decision to step away from some identified targets.
“Also, when we nearly lost a key person,” Andy adds, “The investors did bring him around and get him to stay.”
Andy adds, “When you are an entrepreneur working your butt off, it is great to get that cash pay out as well as have cash to grow the business. With private equity you get the best of both worlds—the cash liquidity without the rigorous scrutiny of the public market.”
“Not every company can go public,” says Andy. “Private equity will transition you.” See if you can go public. Take Andy’s test and put the necessary tick marks next to your chart.
− You are making enough money to pay for public listing and accounting.
− You are profitable.
− You have a strong growth curve for your revenues.
− You have a decent management team.
− You are a good size.
Andy says, “At the time of the private equity deal, we were too small to go public. With private equity investors, we got to retain control and we got liquidity. Private equity took us back from the brink with risky debt and looming covenants. They were the stepping stone to getting big enough until in 2005, Somerset did our initial public offering (IPO). Selling those secondary shares was sweet, too.”
As Andy Burgess stood on the stage and let the applause of the audience sweep over him, it struck him how far Somerset Entertainment had come and what a ride it had been so far.
This is an excerpt from Money Magnet: Attracting Investors to your Business. Read more:
July 17, 2009
Women need to break through in banking
A new study finds no progress breaching top ranks despite industry's employment growth, says Dana Flavelle, Business Reporter for The Globe & Mail.
I must add here that I just finished a meeting with a South African finance expert who commented that although Canada is so open in business culture to people from anywhere, Bay Street is a tight knit group of Canadians. So, although this banking study focusses on women's difficulties in getting to the top, there are very similar issues for males not from the inner circle of Canadians. The South African went on to comment on how Wall Street is far more open to outsiders.
My question is does that make Canada's finance industry more secure and less likely to suffer Ponzi schemes and Enron debacles? Today, financial business is being done more and more with people you know. Perhaps the Bay Street inner circle does seem to work at keeping stability? I think we need to keep a great deal more in mind when reviewing these damning reports which make great press but are far more complicated with long term consequences we may not understand.
Here's Dana's article:
Stunned silence, groans of recognition and occasional laughter greeted the disappointing data and frank talk yesterday about women and the glass ceiling on Bay Street.
While Canada's banks have made progress promoting women in their other lines of business, in the rough-and-tumble world of stock and bond trading and private wealth management, they have made "virtually no gains," a study shows.
Part of the problem is the industry's lingering image as dominated by a "cigar-chomping group of men" where everyone works 15-hour days, Lynn Kennedy, managing director of foreign exchange for BMO Capital Markets, told a blue-chip luncheon at the King Edward Hotel, where the report was released yesterday.
The idea women need to network after office hours to get ahead is probably overrated, Kennedy added. "In those networks, I think we think a lot more goes on than actually does," she said to a burst of laughter. "I like to think I'm recognized for what I do during the day."
Still, stunned silence greeted the revelation that the latest study by Catalyst Canada found women have made no progress even as employment in capital markets at the management level grew 12 per cent to 16,300 during an eight-year period ending in April 2008.
Despite the stated support of senior bank executives, women remained stuck at 17 per cent of all senior managers, those with jobs that lead to a shot at the corner office, the study found. They made up 21 per cent of all middle managers. Even when support staff are taken into account, women make up just 40 per cent of employees.
"To say we are reporting progress would be overstating the data and before you blame the recession, the data was collected before it began," said Catalyst Canada vice-president Deborah Gillis.
"The truth is women have made virtually no gains," she added, sparking audible groans from an audience of 250 men and women who work in the capital markets industry. "There is still no one holding the title of chairman, president or chief executive officer."
Indeed, women may have lost ground since the credit crunch that began in the United States sparked a global financial meltdown and sweeping layoffs in the investment industry, the study's main client said in an earlier interview.
"We don't even know the impact of the enormous financial crisis. It's a huge concern for me," said Martha Fell, chief executive officer of Women in Capital Markets.
There is debate in some circles that more women at the top would have prevented the kind of testosterone-fuelled risk-taking that caused the financial crisis, Fell added. "I'm not saying I agree with that, but it makes you stop and think."
Catalyst Canada has long argued that presenting the data would lead to change and Fell said she is personally convinced that's the case.
However, she acknowledged in an interview the fact that four highly publicized studies of women in capital markets in eight years have produced little change raises disturbing questions.
"How the heck is this possible? Everything we're doing suggests we should have moved the dial by now," said Fell, whose non-profit advocacy group works with women to help them get ahead.
At least one bank, TD Financial Group, defended its record, saying women had made good progress in its other lines of business.
I must add here that I just finished a meeting with a South African finance expert who commented that although Canada is so open in business culture to people from anywhere, Bay Street is a tight knit group of Canadians. So, although this banking study focusses on women's difficulties in getting to the top, there are very similar issues for males not from the inner circle of Canadians. The South African went on to comment on how Wall Street is far more open to outsiders.
My question is does that make Canada's finance industry more secure and less likely to suffer Ponzi schemes and Enron debacles? Today, financial business is being done more and more with people you know. Perhaps the Bay Street inner circle does seem to work at keeping stability? I think we need to keep a great deal more in mind when reviewing these damning reports which make great press but are far more complicated with long term consequences we may not understand.
Here's Dana's article:
Stunned silence, groans of recognition and occasional laughter greeted the disappointing data and frank talk yesterday about women and the glass ceiling on Bay Street.
While Canada's banks have made progress promoting women in their other lines of business, in the rough-and-tumble world of stock and bond trading and private wealth management, they have made "virtually no gains," a study shows.
Part of the problem is the industry's lingering image as dominated by a "cigar-chomping group of men" where everyone works 15-hour days, Lynn Kennedy, managing director of foreign exchange for BMO Capital Markets, told a blue-chip luncheon at the King Edward Hotel, where the report was released yesterday.
The idea women need to network after office hours to get ahead is probably overrated, Kennedy added. "In those networks, I think we think a lot more goes on than actually does," she said to a burst of laughter. "I like to think I'm recognized for what I do during the day."
Still, stunned silence greeted the revelation that the latest study by Catalyst Canada found women have made no progress even as employment in capital markets at the management level grew 12 per cent to 16,300 during an eight-year period ending in April 2008.
Despite the stated support of senior bank executives, women remained stuck at 17 per cent of all senior managers, those with jobs that lead to a shot at the corner office, the study found. They made up 21 per cent of all middle managers. Even when support staff are taken into account, women make up just 40 per cent of employees.
"To say we are reporting progress would be overstating the data and before you blame the recession, the data was collected before it began," said Catalyst Canada vice-president Deborah Gillis.
"The truth is women have made virtually no gains," she added, sparking audible groans from an audience of 250 men and women who work in the capital markets industry. "There is still no one holding the title of chairman, president or chief executive officer."
Indeed, women may have lost ground since the credit crunch that began in the United States sparked a global financial meltdown and sweeping layoffs in the investment industry, the study's main client said in an earlier interview.
"We don't even know the impact of the enormous financial crisis. It's a huge concern for me," said Martha Fell, chief executive officer of Women in Capital Markets.
There is debate in some circles that more women at the top would have prevented the kind of testosterone-fuelled risk-taking that caused the financial crisis, Fell added. "I'm not saying I agree with that, but it makes you stop and think."
Catalyst Canada has long argued that presenting the data would lead to change and Fell said she is personally convinced that's the case.
However, she acknowledged in an interview the fact that four highly publicized studies of women in capital markets in eight years have produced little change raises disturbing questions.
"How the heck is this possible? Everything we're doing suggests we should have moved the dial by now," said Fell, whose non-profit advocacy group works with women to help them get ahead.
At least one bank, TD Financial Group, defended its record, saying women had made good progress in its other lines of business.
July 16, 2009
Finance Club For Women
For women meeting with private equity investors, you will be judged within the first five minutes. Will you convey confidence that you deserve to manage a whole lot of capital entrusted to you or will your body language say that you are not strong enough? You may give off the wrong message without even opening your mouth.
Here's Forbes Woman's best advice for transforming your self-presentation into one that commands respect. Read more:
Raquel Laneri tells us, "Jeannine Fallon, executive director of corporate communications at Edmunds.com, learned this at a training course called "Women Unlimited," which she attended when she worked at Volvo 10 years ago."
"I distinctly remember one insight," she says of the session. "At a boardroom table, women tend to pile all their materials neatly and sit tucked into the table, while men tend to sprawl out, push away from the table, cross his ankle over a knee and lock arms behind his head. It was impressed upon us that the concept of taking up space correlates to the concept of dominance." The result? "I've never sat tucked into a table since."
Here's Forbes Woman's best advice for transforming your self-presentation into one that commands respect. Read more:
Raquel Laneri tells us, "Jeannine Fallon, executive director of corporate communications at Edmunds.com, learned this at a training course called "Women Unlimited," which she attended when she worked at Volvo 10 years ago."
"I distinctly remember one insight," she says of the session. "At a boardroom table, women tend to pile all their materials neatly and sit tucked into the table, while men tend to sprawl out, push away from the table, cross his ankle over a knee and lock arms behind his head. It was impressed upon us that the concept of taking up space correlates to the concept of dominance." The result? "I've never sat tucked into a table since."
Carey O'Donnell Public Relations Group, based in West Palm Beach, Fla., "many of us have no idea that our non-verbal cues are making an impact. There are thousands of micro-expressions, and people are reading these, even if they are only subconsciously translating these cues."
Some of the visual ticks common to women:
--Tilting your head--a sign of listening that can be misinterpreted as one of submission or even flirting.
--Folding your hands on your lap--hiding your hands under a conference table or desk, for example, signals untrustworthiness; a cue from ancient times, when men would reveal their palms to show they were unarmed.
--Crossing your legs--a sign of resistance.
--Excessive smiling--an indication that you lack gravitas and seriousness.
--Folding your arms in front of you--translates to insecurity or defensiveness.
--Playing with or tugging at your hair, jewelry or clothes--can signal distress or, again, be misinterpreted as flirting.
Well, now we know. I love to play with my jewelry so I had better cut that out! Check out the grumpy comments from men who came to the Forbes site to read the article. One fellow pouts,"If I had known this was body language for women, I would not have checked out this site." Poor man...
July 15, 2009
5 Items to have ready for an investor
You are going to have to do a lot more than pray for money when seeking investors. You are going to have to get "investor ready" as once they look at you, like what they see, then they will want a whole truck full of information...NOW.I get asked all the time, "Where do I find investors?"
That part is easy, actually.
The question everyone should ask is, "what will get the investor to put cash into my business?"
This is the part which separates the men from the boys (and the women from the girls.)
Before you begin looking for people, get yourself ready. As sure as the sun rises in the East, there are items that us investors will require from you. First up, let's look at the 5 items about finances that we will need to tell us more about your business or idea:
1. The income statement is paramount.
If nothing else, if, at the very least, we can look at the income statement from one year of history we can judge how big the company is and how large of a financing it can generate. We would simply look at the earnings, calculate the EBITDA and get a rough idea of the general size of the company
Multiplying this by 6 times would give a very rough idea of the valuation of the company (enterprise value) and how much financing it can withstand. Some people are saying multiple it by 3 times but I think that is a little cruel.
2. The balance sheet is also very important.
From this we can determine the capital structure of the company.
3. Then there's the structure.
Looking at the capital structure allows us to determine what the structure of the financing might look like. It also allows us to determine a more accurate valuation (equity value) and determine the amount of dilution to management.
4. Cash is king, as the saying goes.
Cash flow statements can be derived from having both of these statements, but it is helpful in determining things like how much money management must invest each year to maintain the operations of the company.
5. We are history buffs for a reason.
History: we like to get three years. This is because at least three years allows an analyst to see any financial trends in the company. Having more than three years is even better, but three years is the minimum for noticing trends.
If you are wanting to learn more and get a simple explaination on this in far more details, check out Money Magnet: Attract Investors to Your Business.
It's written by J. Loewen and is simple and, surprisingly, readable because it is written for business owners.
July 14, 2009
What's a Great Job Now?
One of the hottest jobs for B-School graduates is Private Equity and this article in the WSJ is a good reflection of the trend. (If we count the resumes flooding our office, I would agree.)
I suspect many of these recently minted MBAs think that the private equity asset class is where the big salaries lurk and may be disappointed. Private equity is about far more than the money, the best PE people are fighters for the businesses they bring into their portfolios. They have to know the full range of business - in particular, cash flow. You can not get that from an MBA. Anyway, here's the WSJ article in brief:
"The percentage of graduates from the world's top business schools taking private-equity jobs has more than doubled in the past six years, according to the business schools' numbers.
"Financial News analyzed figures from five of the most popular M.B.A. schools:
- Harvard Business School,
- Stanford Graduate School of Business and
- the Wharton School at the University of Pennsylvania in the U.S.;
- the U.K.'s London Business School; and
- Insead, based in France and Singapore.
The percentage of Harvard M.B.A. graduates moving into private equity and venture capital has more than doubled, from 8% in 2003 to 21% among last year's graduates. In that time, the proportion moving into investment banking rose far less, from 7% in 2003 to 9% last year.
Data from Stanford showed a similar trend, with 9% of graduates choosing private equity in 2003 rising to 19% last year, compared with 4% and 5% for investment banking. Harvard supplied the highest number of M.B.A. graduates moving to private equity last year, with 191. Stanford was second with 72, ahead of Wharton's 45, Insead's 25 and London's 22.
Private equity's rise in popularity reflects the perception that graduates could make more money working in the asset class than in investment banking, but also follows substantial growth in the size of the private-equity market. However, an M.B.A. isn't a prerequisite for joining many private-equity firms. A sample of 10 large European and U.S. firms showed that 52% of the executives at partner level or above had obtained M.B.A.s.
Firms' Web sites showed French group PAI Partners had the lowest proportion, with 21%, or four of its 19 partner-level executives.The private-equity units of U.S. firms Kohlberg Kravis Roberts and Blackstone Group also had high proportions of MBAs among their senior staff, 61% and 63%, respectively.
Patrick Dunne, group communications director at 3i Group PLC, where 48% of partner-level staff had M.B.A.s, said: "For some people, [an M.B.A.] can be fantastically helpful -- for those without a finance background, for example, it can be a useful way of picking up necessary skills and knowledge."
I suspect many of these recently minted MBAs think that the private equity asset class is where the big salaries lurk and may be disappointed. Private equity is about far more than the money, the best PE people are fighters for the businesses they bring into their portfolios. They have to know the full range of business - in particular, cash flow. You can not get that from an MBA. Anyway, here's the WSJ article in brief:
"The percentage of graduates from the world's top business schools taking private-equity jobs has more than doubled in the past six years, according to the business schools' numbers.
"Financial News analyzed figures from five of the most popular M.B.A. schools:
- Harvard Business School,
- Stanford Graduate School of Business and
- the Wharton School at the University of Pennsylvania in the U.S.;
- the U.K.'s London Business School; and
- Insead, based in France and Singapore.
The percentage of Harvard M.B.A. graduates moving into private equity and venture capital has more than doubled, from 8% in 2003 to 21% among last year's graduates. In that time, the proportion moving into investment banking rose far less, from 7% in 2003 to 9% last year.
Data from Stanford showed a similar trend, with 9% of graduates choosing private equity in 2003 rising to 19% last year, compared with 4% and 5% for investment banking. Harvard supplied the highest number of M.B.A. graduates moving to private equity last year, with 191. Stanford was second with 72, ahead of Wharton's 45, Insead's 25 and London's 22.
Private equity's rise in popularity reflects the perception that graduates could make more money working in the asset class than in investment banking, but also follows substantial growth in the size of the private-equity market. However, an M.B.A. isn't a prerequisite for joining many private-equity firms. A sample of 10 large European and U.S. firms showed that 52% of the executives at partner level or above had obtained M.B.A.s.
Firms' Web sites showed French group PAI Partners had the lowest proportion, with 21%, or four of its 19 partner-level executives.The private-equity units of U.S. firms Kohlberg Kravis Roberts and Blackstone Group also had high proportions of MBAs among their senior staff, 61% and 63%, respectively.
Patrick Dunne, group communications director at 3i Group PLC, where 48% of partner-level staff had M.B.A.s, said: "For some people, [an M.B.A.] can be fantastically helpful -- for those without a finance background, for example, it can be a useful way of picking up necessary skills and knowledge."
July 7, 2009
How's your AQ?
I was reading the lists of the businesses that made it the Profit 100 fastest growing companies list, and I was reminded of one of Rick Spence's recent Twitter postings. He commented, "Being an entrepreneur is like being punched in the face, frequently, but to have the ability to keep on going."
Something like that.
Like Rocky, my favourite movie character, said, "It's not how hard you can hit, but how much you can take and still keep moving forward.
So, when I emailed the many entrepreneurs I knew from the Profit 100 list, I mentioned that their adversity quotient must be very high. Most of them understood what I was saying, but a few wrote back asking if this was their "pig-headedness" quotient too!
Here's a quick summary of AQ:
Adversity Quotient, called AQ, is like Intelligence Quotient or IQ.
AQ is the science of human resilience.
People who successfully apply AQ perform optimally in the face of adversity — the challenges, big and small, that confront us each day. In fact, they not only learn from these challenges, but they also respond to them better and faster. For businesses and other organizations, a high-AQ workforce translates to increased capacity, productivity, and innovation, as well as lower attrition and higher morale.
Something like that.
Like Rocky, my favourite movie character, said, "It's not how hard you can hit, but how much you can take and still keep moving forward.
So, when I emailed the many entrepreneurs I knew from the Profit 100 list, I mentioned that their adversity quotient must be very high. Most of them understood what I was saying, but a few wrote back asking if this was their "pig-headedness" quotient too!
Here's a quick summary of AQ:
Adversity Quotient, called AQ, is like Intelligence Quotient or IQ.
AQ is the science of human resilience.
People who successfully apply AQ perform optimally in the face of adversity — the challenges, big and small, that confront us each day. In fact, they not only learn from these challenges, but they also respond to them better and faster. For businesses and other organizations, a high-AQ workforce translates to increased capacity, productivity, and innovation, as well as lower attrition and higher morale.
July 1, 2009
5 Ways GE is charging up their tired batteries
Jeff Immelt spoke before the Detroit Economic Club yesterday and I got summary notes from Judith Ellis via Tom Peters web site. Here is some of what he said:"Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy — and somehow still expect to prosper. That idea was flat wrong."
"Recently my colleague Peter Loescher, the CEO of Siemens, extolled the importance of Germany as an exporting country. In my career, I have never heard an American CEO say that the United States should be leading in exports. Well, I am saying it today: This country ought to be, and we can be, not just the world’s leading market but a leading exporter as well. GE plans to lead this effort. We have restructured during the downturn, adjusting to the market realities. At the same time, we are increasing our investments. We plan to launch more new products during this downturn than at any time in our history. We will sell these products in every corner of the world. We are creating a better company coming out of this reset. Similarly, America needs a dramatic industrial renewal. We have to move forward on five fronts."
First: Increase investment in research and development.
"GE has never forgotten the importance of R&D. Each year, we put six percent of our industrial revenue back into technology — so much that more than half of the products we sell today didn’t even exist a decade ago. As a consequence, we are a huge exporter… GE’s R&D budget has not been cut. And that’s a course of action I’d recommend to every company that wants to get through the economic crisis even stronger than before."
Second: America should get busy addressing the two biggest global challenges — clean energy and affordable health care.
Second: America should get busy addressing the two biggest global challenges — clean energy and affordable health care.
"There is no question whether there will be break throughs in these areas — just by who and when. The leader in these fields will dominate the global economy in the decades that come."
Third: We must make a serious commitment to manufacturing and exports.
Third: We must make a serious commitment to manufacturing and exports.
"This is a national imperative. "We all know that the American consumer cannot lead our recovery. This economy must be driven by business investment and exports… America has to get back in that game … and it starts with a strong core of innovation."
Fourth: We should welcome the government as a catalyst for leadership and change.
Fourth: We should welcome the government as a catalyst for leadership and change.
"There’s a long history in this country of government spending that prepares the way for new industries that thrive for generations. Think of the NIH or NASA, and all the new innovations that came out of these programs — from computing to communications to health care. America has that kind of chance with unprecedented levels of new government investment. ... The key is making sure those hundreds of billions of dollars fall on the fertile ground of innovation, and not bureaucracy."
Fifth: It is possible for a global business leader to also be a good citizen.
Fifth: It is possible for a global business leader to also be a good citizen.
"We must partner in our communities. Big business should work with smaller companies in our supply chain to help them compete globally. And we should partner with local governments to fix our education system. In the end, business leaders are accountable for the competitiveness of their own country. We must say so publicly. This will not hurt our ability to globalize. Rather, I think it will make other countries admire our business leaders more. We must end the impression that American CEOs are short-term speculators."
Fighting words from Immelt and interesting themes.
Here in Canada, our Government is certainly listening and asking what they can do to help business. Government can play a big role in driving markets and being the first customer of size. At least Jeff Immelt is an American leader taking all the criticism about the US and, as a result, doing something differently today. Lead on, Jeff.
June 30, 2009
An equation for valuation
Mary Bitti has a good article in The National Post. Read online.
Armada Data Corp. is a bright spot in the auto industry. With car sales down 15% to 20% in the past three months and GM and Chrysler continuing their downward slide, Mississauga, Ont.-based Armada Data is enjoying a 40% to 50% jump in sales and a doubling of market share, and it has plans to expand through acquisition.
In its 10th year, the company listed on the TSX Venture Exchange in Vancouver, gathers new car pricing data and sells the information directly to new car buyers via Car Cost Canada.
"We help consumers save money by giving them the information they need to negotiate a better price," says Paul Timoteo, president of Armada Data. "In these times, people are shopping around more. The more research they do, the more they see the value in our service. We've seen a huge spike in sales in the past six months."
Strong sales plus a debt-free balance sheet have placed Armada Data in shopping mode, and it is now looking at potential acquisitions. "When it comes to assessing value, I know what to look for," Mr. Timoteo says.
Namely: the company's ability to grow; its market share; its rate of growth; its history of profitability, current profitability and potential for future profitability; and its debt load. That's the financial side. Then there are the less tangible questions such as: How uniquely is it positioned in the marketplace? Who are its competitors? How does it compare to those competitors? What kind of marketing initiatives is it involved in? How do consumers and investors look at the company?
"If your company is profitable, typically the market says your company is worth anywhere from five to 10 times its annual profit," Mr. Timoteo says.
"That said, if we feel that merging a company with ours will disproportionately increase the value of our company, I may be prepared to pay more than it's theoretically worth because I know together we'll grow faster than either of us would have on our own."
That is why Jacoline Loewen of corporate finance firm Loewen & Partners and author of Money Magnet: How to Attract Investors to your Business, describes valuation as an art not a science. "It's expectations. How you sell yourself is huge," she says.
"It's about a lot more than money. Sales revenues give you enormous credibility but many companies get investment without any revenues. Angels will want to help because they like you and your business. At the end of the day you have to be able to stand by your valuation, build a case for the amount of time you've put in, the goodwill of your brand, your intellectual property," Ms. Loewen says.
How you choose to build that case may take different approaches says Steve Gedeon, professor of entrepreneurship at Ryerson University's Ted Rogers School of Management.
"There are essentially three reasons an entrepreneur would put a value on their business: To attract investment or if you are selling shares or selling the entire company; in the event of divorce or for estate-planning purposes; or if you want to offer employees stock options," he says.
"There are many different ways to go about placing a value on the business. The valuation method you choose is the starting point for negotiation. Ultimately, a company is only worth what someone is willing to pay for it."
Mr. Gedeon outlines three approaches to business valuation:
-Discounted cash flow, which is the net present value of all future profits of the company. "The trouble, of course, is nobody knows what the future will hold," Mr. Gedeon says.
-Similar company transaction, where basically, you adopt the known price someone was willing to pay for a company like yours.
-Replacement method, which pegs value at the cost to recreate the company.
When it comes to startups a rule of thumb applies: "Early stage businesses that don't have revenue will never be worth more than $2-million," Ms. Loewen says.
To build value, Mr. Gedeon, shares this rule of thumb: "The larger your profits and the more stable they are, the higher the valuation. How do you build stability? Diversify your client base and increase your differentiation in the market."
For Mr. Timoteo, the key to being profitable is simple: "Either increase revenue or lower your expenses. If you can do both you're in good shape."
The National Angel Capital Organizations' Best Practices Guide for Angel Groups and Investors ( angelinvestor.ca/Best_Practices.asp)has a detailed review of valuation methods.
Armada Data Corp. is a bright spot in the auto industry. With car sales down 15% to 20% in the past three months and GM and Chrysler continuing their downward slide, Mississauga, Ont.-based Armada Data is enjoying a 40% to 50% jump in sales and a doubling of market share, and it has plans to expand through acquisition.
In its 10th year, the company listed on the TSX Venture Exchange in Vancouver, gathers new car pricing data and sells the information directly to new car buyers via Car Cost Canada.
"We help consumers save money by giving them the information they need to negotiate a better price," says Paul Timoteo, president of Armada Data. "In these times, people are shopping around more. The more research they do, the more they see the value in our service. We've seen a huge spike in sales in the past six months."
Strong sales plus a debt-free balance sheet have placed Armada Data in shopping mode, and it is now looking at potential acquisitions. "When it comes to assessing value, I know what to look for," Mr. Timoteo says.
Namely: the company's ability to grow; its market share; its rate of growth; its history of profitability, current profitability and potential for future profitability; and its debt load. That's the financial side. Then there are the less tangible questions such as: How uniquely is it positioned in the marketplace? Who are its competitors? How does it compare to those competitors? What kind of marketing initiatives is it involved in? How do consumers and investors look at the company?
"If your company is profitable, typically the market says your company is worth anywhere from five to 10 times its annual profit," Mr. Timoteo says.
"That said, if we feel that merging a company with ours will disproportionately increase the value of our company, I may be prepared to pay more than it's theoretically worth because I know together we'll grow faster than either of us would have on our own."
That is why Jacoline Loewen of corporate finance firm Loewen & Partners and author of Money Magnet: How to Attract Investors to your Business, describes valuation as an art not a science. "It's expectations. How you sell yourself is huge," she says.
"It's about a lot more than money. Sales revenues give you enormous credibility but many companies get investment without any revenues. Angels will want to help because they like you and your business. At the end of the day you have to be able to stand by your valuation, build a case for the amount of time you've put in, the goodwill of your brand, your intellectual property," Ms. Loewen says.
How you choose to build that case may take different approaches says Steve Gedeon, professor of entrepreneurship at Ryerson University's Ted Rogers School of Management.
"There are essentially three reasons an entrepreneur would put a value on their business: To attract investment or if you are selling shares or selling the entire company; in the event of divorce or for estate-planning purposes; or if you want to offer employees stock options," he says.
"There are many different ways to go about placing a value on the business. The valuation method you choose is the starting point for negotiation. Ultimately, a company is only worth what someone is willing to pay for it."
Mr. Gedeon outlines three approaches to business valuation:
-Discounted cash flow, which is the net present value of all future profits of the company. "The trouble, of course, is nobody knows what the future will hold," Mr. Gedeon says.
-Similar company transaction, where basically, you adopt the known price someone was willing to pay for a company like yours.
-Replacement method, which pegs value at the cost to recreate the company.
When it comes to startups a rule of thumb applies: "Early stage businesses that don't have revenue will never be worth more than $2-million," Ms. Loewen says.
To build value, Mr. Gedeon, shares this rule of thumb: "The larger your profits and the more stable they are, the higher the valuation. How do you build stability? Diversify your client base and increase your differentiation in the market."
For Mr. Timoteo, the key to being profitable is simple: "Either increase revenue or lower your expenses. If you can do both you're in good shape."
The National Angel Capital Organizations' Best Practices Guide for Angel Groups and Investors ( angelinvestor.ca/Best_Practices.asp)has a detailed review of valuation methods.
June 29, 2009
Kevin O'Leary hates private equity
Kevin O’Leary says that he hates private equity – he threw out this comment on Twitter (I am enjoying his tweets). In actual fact, with Kevin's trademark honesty, he hits on the truth.I can get Kevin’s pain.
Private equity investing ain't for most investors because most people only want to give their money out for a year, and then they want to get it back.
Private equity’s horizon is a far longer arc so there's your first hurdle.
Then investors used to public markets want to be passive investors, putting in money but nothing else. According to his Twitter tweets, Kevin wants to sit on his dock in Muskoka, sipping wine, deciding whether to BBQ ribs or not, and collecting interest on his investments.
Quite right, Kev...don't we all?
Private equity is not the usual asset class or public market vehicle you can pick up or drop overnight. It is for the long term. For investors like Kevin who likes to have his money come home to visit Daddy once in a while, private equity (with its five year investment horizon) is simply too long term.
Private equity is not the usual asset class or public market vehicle you can pick up or drop overnight. It is for the long term. For investors like Kevin who likes to have his money come home to visit Daddy once in a while, private equity (with its five year investment horizon) is simply too long term.
Yes, I hear you saying that the returns on the initial lump investment will be larger than the public market returns, but private equity investors also put a great deal of effort into building the business too (not as much time for the wine sipping and BBQing). For investors who do not know how to do strategy with the company management team, or do not want to attend board meetings or pick up the phone and help sales – leave private equity alone. You will only get more burnt than Kevin O'Leary's BBQ ribs.
O’Leary’s right – private equity is hard. Funny thing though, I think Kevin would be a great private equity investor as owners would appreciate his candour, his rolodex, his big vision and his energy. Now, with all this talk about ribs, I'm going for lunch.
O’Leary’s right – private equity is hard. Funny thing though, I think Kevin would be a great private equity investor as owners would appreciate his candour, his rolodex, his big vision and his energy. Now, with all this talk about ribs, I'm going for lunch.
How far do you go to invest?
How far from your office should you go to invest in companies? Would you be only interested in twenty clicks of Toronto or will you look past the Southern Ontario iron curtain?
Financial gurus are bellowing that the next twenty years growth will be in BRIC countries. "You need to move on to richer, more verdant pastures!" How will this play out for private equity?
Where to find growth is a pressing question and it is a difficult challenge for small PE firms. How will these Canadian private equity experts invest? Will it be directly into Indian and Chinese companies? The more likely scenario is to invest in Canadian companies doing business with BRIC countries?
I do know that the equity partners within a few hours drive are more likely to consistently show up to the Board meetings, contribute and even drive the strategy, get people into the office on Mondays to drive the action and generally make themselves very useful.
If the PE firm can do all of that even if far away, then terrific.
Here's Carried Interest chatting about his investment in an Australian company and they challenges he is learning about - including the language. Turns out that even though they speak English, "S'tralian has to be translated a bit. Read more...
Financial gurus are bellowing that the next twenty years growth will be in BRIC countries. "You need to move on to richer, more verdant pastures!" How will this play out for private equity?
Where to find growth is a pressing question and it is a difficult challenge for small PE firms. How will these Canadian private equity experts invest? Will it be directly into Indian and Chinese companies? The more likely scenario is to invest in Canadian companies doing business with BRIC countries?
I do know that the equity partners within a few hours drive are more likely to consistently show up to the Board meetings, contribute and even drive the strategy, get people into the office on Mondays to drive the action and generally make themselves very useful.
If the PE firm can do all of that even if far away, then terrific.
Here's Carried Interest chatting about his investment in an Australian company and they challenges he is learning about - including the language. Turns out that even though they speak English, "S'tralian has to be translated a bit. Read more...
Do this with your family
Do you remember a particular tree from your summers past? Is there a tree your family gathers beneath and has shared history with you? Here's your chance to do something with your family this summer.A province-wide program to identify trees across the province with stories was announced today by Trees Ontario. The Heritage Tree program celebrates those trees that have cultural or historical significance to the community or province.
Heritage Trees could be those around which a community has held an annual picnic for the past 100 years, the tree that was planted to commemorate a coronation or other important international event, a tree that was planted to celebrate the life of a soldier or one in an historically designated neighbourhood. The trees should be part of the fabric of that community.
Anyone can nominate a tree by registering on the Trees Ontario Heritage Tree web site (http://www.blogger.com/www.heritagetrees.on.ca). A nominated tree is evaluated by a Trees Ontario representative based on the following characteristics: its historical and cultural importance to local and broader community; rarity of species; prominence based on size and age; aesthetics and/or artistic peculiarity; and its physical conditions and expected longevity. The evaluation criteria can be found on the Heritage Tree web site.
If the tree meets the above criteria, it will be placed into the Heritage Trees online database. If identified as a Heritage Tree it will also be recognized with a certificate.
A Heritage Tree is usually more than 70 years old. What sets them apart is the important cultural and historical significance they represent. “If these trees could talk, they could provide an intriguing history lesson about the people and land around which they are rooted,” said Michael G. Scott, President and CEO, Trees Ontario. “For the communities and people that enjoy, celebrate and nurture these green giants, they are a source of pride, full of rich memories and stories that they can now share.”
The Ontario Urban Forest Council’s (OUFC) Heritage Tree Toolkit formed the basis for the Trees Ontario Heritage Tree program. “The toolkit was developed in response to the public’s interest in identifying heritage trees in the community,” said Jack Radecki, Executive Director, OUFC. “OUFC is thrilled to be working with Trees Ontario to launch the online provincial program.”
“We are pleased to be working with OUFC to extend their Heritage Tree Toolkit into a province-wide program available to the public,” Scott continued. “We look forward to receiving nominations from across the province and to reading wonderful stories about important trees in our province.”
Trees Ontario has already begun working with other agencies to identify some trees that could be nominated. These are currently under review by Trees Ontario representatives and include trees from Aylmer, Cataraqui, Collingwood, Prince Edward County and Toronto.
Another important aspect of this program is the opportunity to collect seeds from recognized, native Heritage Trees, thus ensuring that the tree’s seeds live on. Trees Ontario plans to work with local communities to locate and collect these seeds. Growing trees from native seeds is important as those species have adapted to the regional environment over thousands of years and are more likely to survive.
For more information on Trees Ontario and the Heritage Tree Program, visit http://www.blogger.com/www.heritagetrees.on.ca.
Heritage Trees could be those around which a community has held an annual picnic for the past 100 years, the tree that was planted to commemorate a coronation or other important international event, a tree that was planted to celebrate the life of a soldier or one in an historically designated neighbourhood. The trees should be part of the fabric of that community.
Anyone can nominate a tree by registering on the Trees Ontario Heritage Tree web site (http://www.blogger.com/www.heritagetrees.on.ca). A nominated tree is evaluated by a Trees Ontario representative based on the following characteristics: its historical and cultural importance to local and broader community; rarity of species; prominence based on size and age; aesthetics and/or artistic peculiarity; and its physical conditions and expected longevity. The evaluation criteria can be found on the Heritage Tree web site.
If the tree meets the above criteria, it will be placed into the Heritage Trees online database. If identified as a Heritage Tree it will also be recognized with a certificate.
A Heritage Tree is usually more than 70 years old. What sets them apart is the important cultural and historical significance they represent. “If these trees could talk, they could provide an intriguing history lesson about the people and land around which they are rooted,” said Michael G. Scott, President and CEO, Trees Ontario. “For the communities and people that enjoy, celebrate and nurture these green giants, they are a source of pride, full of rich memories and stories that they can now share.”
The Ontario Urban Forest Council’s (OUFC) Heritage Tree Toolkit formed the basis for the Trees Ontario Heritage Tree program. “The toolkit was developed in response to the public’s interest in identifying heritage trees in the community,” said Jack Radecki, Executive Director, OUFC. “OUFC is thrilled to be working with Trees Ontario to launch the online provincial program.”
“We are pleased to be working with OUFC to extend their Heritage Tree Toolkit into a province-wide program available to the public,” Scott continued. “We look forward to receiving nominations from across the province and to reading wonderful stories about important trees in our province.”
Trees Ontario has already begun working with other agencies to identify some trees that could be nominated. These are currently under review by Trees Ontario representatives and include trees from Aylmer, Cataraqui, Collingwood, Prince Edward County and Toronto.
Another important aspect of this program is the opportunity to collect seeds from recognized, native Heritage Trees, thus ensuring that the tree’s seeds live on. Trees Ontario plans to work with local communities to locate and collect these seeds. Growing trees from native seeds is important as those species have adapted to the regional environment over thousands of years and are more likely to survive.
For more information on Trees Ontario and the Heritage Tree Program, visit http://www.blogger.com/www.heritagetrees.on.ca.
June 25, 2009
Jack Welch gets into videos.
Listening to business leaders is a great way to leap frog your own company, and the business podcasts on iTunes are one way to get access to the best business minds in the world.
One of my favourite podcasts is Jack and Suzy Welch, listed under BusinessWeek. Each week, Jack riffs about business, with Suzy pushing for clarification. It's a great listen. Jack is now starting his online university and all I can say, this is the new way of education.
Here is the next level of Jack and Suzy's show.
RT @jack_welch: Web show- It’s Everybody’s Business (with Microsoft) View it here. http://bit.ly/6dCCF
One of my favourite podcasts is Jack and Suzy Welch, listed under BusinessWeek. Each week, Jack riffs about business, with Suzy pushing for clarification. It's a great listen. Jack is now starting his online university and all I can say, this is the new way of education.
Here is the next level of Jack and Suzy's show.
RT @jack_welch: Web show- It’s Everybody’s Business (with Microsoft) View it here. http://bit.ly/6dCCF
Those tasty green shoots turn out to be weeds
Worries about the economy are keeping market analysts up at night. I appreciated getting a good news story from Lynn Lewis at Scotia Mcleod, Toronto to help understand the situation.
Green shoots turn out to be weeds, says Ross McKitrick, Financial Post:
The four problems are: the diluted balance sheet of the U. S. Federal Reserve; Obama's deficit binge; the growing wave of "Option-ARM" mortgage resets in U. S. real estate; and the California state budget crisis. We need to watch how these issues develop over the summer to know whether a recovery later this year will be possible. Those green shoots could be weeds.
Green shoots turn out to be weeds, says Ross McKitrick, Financial Post:
The four problems are: the diluted balance sheet of the U. S. Federal Reserve; Obama's deficit binge; the growing wave of "Option-ARM" mortgage resets in U. S. real estate; and the California state budget crisis. We need to watch how these issues develop over the summer to know whether a recovery later this year will be possible. Those green shoots could be weeds.
June 22, 2009
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
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
June 20, 2009
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.
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.
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.
June 19, 2009
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.
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.
June 16, 2009
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
Here is Mike Shedlock's presentation at Google Tech Talk May 6, 2009.
http://www.youtube.com/watch?v=1YKc0UolTqE
June 12, 2009
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.
June 11, 2009
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.
June 10, 2009
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?
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?
June 9, 2009
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.
June 6, 2009
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
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