Lead, Follow or Get Out of the Way

“Indecision and silence is the most dangerous risk a business owner could take”, says Charles Loewen, CEO and President of a fourth generation family business. Loewen Windows is a company where seeming opposites exist in harmony; delicate beauty and a steely toughness; pride in craft tempered by an abiding humility. This family business has remained faithful to its roots, but has also grown to embrace new technologies and ideas from places as diverse as Europe, Japan, and North America.

Loewen Windows went through expansion and contraction in the Japanese market during the Ninties.

Charles Loewen, CEO of Loewen Windows is speaking at a joint Ivey Business School and Loewen & Partners CEO Roundtable event.

If you are interested in attending, here are the details:

Thursday, November 20th, 2008

10:30 am – 3:00 pm

The National Club

303 Bay Street, Toronto

Bay Street & Adelaide, Downtown Toronto

Map Location & Parking
Cost $148.00 + GST
To Register (Please note, business owners and CEOs only):
Please email: akobeleva@loewenpartners.com or call 416 961 0740 and ask for Anastassia

Have We Dodged The Bullet?

It was not long ago that some experts were predicting a $200 price for oil but with it down far below predictions, Dr. Warren Jestin of ScotiaCapital warned, speaking at a conference on fuel price held by DTA, “Don’t get fooled by the drop in fuel prices. It will go back up.” Have we dodged the bullet here in Canada? Although Canada is night and day to the USA with our banking system, we are still impacted. USA’s “borrow to buy” model is not in Canada and that sub prime idea proves that not all innovation is good.
“Step back and understand the fundamentals,” advised Dr. Warren Jestin, ScotiaCapital.
Warren Justin, Chief Economist of ScotiaCapital. Warren joined Scotiabank some 25 years ago and is a popular public speaker and media commentator on economic issues in Canada and abroad. His expertise both about Canadian and global economic issues is extensive and his team's research work is leading edge.
Dr Jestin believes Canadian Banks are in good shape
For the last fifteen years the USA has used the “borrow to buy” model which was most prevalent in housing. There was a record number of Americans owning their own home but the model could not be sustained. Consequently, the USA is deleveraging and with eighteen months of housing inventory to clear, this will take years.
The core message is that the growth rate of China is above 10% and even if it slows with the global problems, it will drop to 8% which is still a very attractive opportunity for investment money, compared to the USA growth rate of 1% to 3%. Inevitably, there will be a shift in where foreign investment flows and this will affect our economy.
Fuel Prices Will Return to Highs
As for fuel prices, Dr. Warren Jestin advises to treating the Canadian dollar as if it were on par with the US dollar even if it drops below, since commodity prices will rise up again. By the end of next year, expect fuel prices to also move back up as commodity prices increase again. Supply conditions for oil could be affected by OPEC and whether it decides to cut back production. Oil is being used less as companies become more productive. "Ultimately," John Loewen , CEO of Loewen & Partners, says, "China will determine the price of oil and it is on a growth trajectory."

Design Your Freight Program

It goes without saying that the manufacturing and retail industries are slowing and this is a challenge to the status quo. A well designed freight program can add good value.

“Many companies are asking ‘What can we do well here in North America? Credit is tight and how can we make better use of the dollars we do have?’” said Dan Goodwill, a specialist in Logistics at an event with DTA and Jacoline Loewen, author of Money Magnet and a partner in raising capital. Don Goodwill advises, “A good place to start where there are opportunities for cost savings and logistics offers many hidden opportunities.”
Have a Score Card
§ On time service
§ Billing accuracy
§ Refusal rates – is your order profitable to them?
§ Claims and exceptions
Goodwill suggests that the key is to actively look for paradigm shifts. In other words - change from one way of thinking to another.

Places to Start to Look for Change

1. Examine your inland freight costs – it’s a missed opportunity. Look at alternative logistic venders and change your requirements. Could you live with longer lead time of five days instead of two and go for a lower price? Revisit your economies of serving your own market and see where you can be flexible.
2. Check your assumptions about the cheapest and best ways. There was a time when if comparing box cars and trucks and you were doing a bid - the truck rates were better than the car load. This has shifted.
3. How can you leverage your freight smarter? For example, are there ways you can make life easier for your carrier? Are you asking them to arrive at four in the afternoon and then sit there waiting, charging up your fee?
4. Look to your customers’ needs. For example, Shoppers Drug Mart has inbound freight from many vendors and wants to leverage that freight cost as it is a good opportunity to save money. Instead of 3,000 incoming vendors, it wants to go down to 1,000. How can you help your customers simplify, streamline and save money?
5. Understand your true costs. You can benchmark fuel surcharges and figure out the rate between Calgary and Montreal.

Dan Goodwill, President Dan Goodwill & Associates. Dan was the previous President of Yellow Canada, President of Clarke Logistics, General Manager of TNT Railfast and Vice President Sales & Marketing TNT Overland Express. His broad experience makes him a knowledgeable public speaker on cost savings programs and profit generation.

Private Equity Key to Strategic Expansion

Having recently partnered with Bermingham Construction, a Hamilton-based manufacturing company and winner of the 2008 E&Y Manufacturing Entrepreneur of the Year award, C.A. Bancorp was a key component in its successful transition to global markets. Mark MacDonald, Managing Director, Private Investments, will discuss the process of working with a private equity firm for the first time. C.A. Bancorp is an alternative asset manager that specializes in small and mid-cap opportunities. C.A. Bancorp seeks to help private companies innovate by investing expertise and intensive analysis of macroeconomic themes, industry trends, and market dynamics.

Having a partner like C.A. Bancorp helped the family owned business move from stagnation to dynamic growth to markets far more dynamic than the mature North American marketplace. It takes guts to allow in partners but do you want to be rich or be in control?" asks Jacoline Loewen, author of Money Magnet and partner with Loewen & Partners.

Join the Discussion with Mark:

Thursday, November 20th, 2008

10:30 am – 3:00 pm

The National Club

303 Bay Street, Toronto

Bay Street & Adelaide, Downtown Toronto

Map Location & Parking
Cost
$148.00 + GST
To Register (Please note, business owners and CEOs only):
Please email: akobeleva@loewenpartners.com or call 416 961 0740 and ask for Anastassia

How to Take Money From a Dragon

Guest Post on Dragon’s Den by J. B. Loewen

Imagine, if you would, that you are about to pitch your business to the Dragons and are being shown toward the Den. (I presume the CBC producers use long, pointy sticks to prod entrepreneurs forward). Ahead of you lie the huge vault doors which remind you no one escapes the lair of the Dragons. There they wait in the gloom, seated up high (increasing the drama) and TV cameras glint menacingly, waiting to capture the moment you are flayed to the bones. You are tethered to a pole and the Dragons rise up shrieking and set upon you.
Well…not quite.
But reading through the blogs and Fan Forums, there are many comments from viewers who find the rough & tumble of the Dragon discussions distasteful – as if CBC has brought back Elizabethan Bear Baiting for our viewing pleasure.
Yet, gentle viewer, I believe this week’s session of Dragons’ Den awarded more to the entrepreneurs than the Dragons. First to enter the Dragons’ lair was Larry Destiny, his stage name from days as a fearsome pro-wrestler. Still carrying a glimmer of his wrestling ring stage presence, Larry rolled out his product called Attitubes – water filled weights.
As Arlene Dickinson said, “If someone had come to me with the idea of a ball in every gym, I would not have believed it.”
Larry quickly lured all the Dragons down to his pit and had them doing deep knee bends and even got Big Jim Treliving hoisting his watery weights above his head.
Now who’s being tortured here, folks?
With the Dragons suitably subdued and keen to learn more, Mr. Destiny let loose his own bit of torture, “I do not have a single sale.” Attitubes is still just an idea – patented – but a concept only. The Dragons fell into a heated discussion over whether it could be licensed or sold. Robert Herjovac informed Larry he had been drinking some wicked Kool-Aid to offer 20% of his company for $200,000 (making it an $800,000 valuation). If Larry had some sales to prove the concept, it would have been different. One by one, the Dragons backed away and Big Jim suggested Larry take charge of his own destiny. Last to speak was Arlene. She said, “$200,000 cash but for 60% of the company.”
With Larry off to call a partner, I waited for one of Kevin O’Leary’s intemperate jokes but this time it was Robert hurling words like ‘ludicrous’ and accusing Arlene of sitting too close to Kevin, picking up his evil aura, and stealing a naïve entrepreneur’s business – yet again!
Kevin, normally the hot head, calmly agreed with Robert, telling Arlene she was taking over his role of Chief Incubus of Venture Capital. She just gave them her Mona Lisa smile but W. Brett Wilson stepped into the frey and told the others to back off, “Arlene’s in and you’re not – so stop badgering her.”
I was hoping for a fight, swords drawn, maybe a fatal blow struck but no such luck because of Destiny. That’s right, Larry returned. Guess I’ll stick to Hockey Night in Canada for the gloves-off fights.
Here’s where the cruelty to Dragons begins. Larry negotiated the same cash deal but lowered the offer to 50% ownership. People, please, this is a lot of cash for just an idea. Yet when Brett stepped back into the deal, bringing his sports teams and gym to use the product, Larry was soooooo mean. No way was he changing his power play – boom, boom, boom. His brutality shocked me. Even Brett said, “When we shake, don’t crush my hand.”
Note to Larry: May I suggest a brand name switch? What about Aquatubes? It gives the water concept and Attitubes is little too close to ‘tubby’ for my liking. Oh, if you do go with my idea – how about $200,000?
This deal of Brett and Arlene’s was a bone crunching triumph for Larry Destiny. Here we get a glimpse of Venture Capital at its best. Research out of Harvard Business School says that money from outsiders is more likely to spur on success than cash from your favourite auntie or your mum. There you go – Larry Destiny and all you entrepreneurs out there, Dragons’ Den offers you a great chance to get the wealth you deserve. For all those who withstand the Dragons’ fire, enduring their scorn, you will be stronger. Otherwise, there is the long standing tradition where outside the CBC building, the heads of entrepreneurs are displayed on spikes as grisly reminders of those who spurned the advice of the Dragons.

J.B. Loewen raises capital for growth companies and is the author of Money Magnet: Attract Investors to Your Business.

Private Equity Investors are Ready to Spend

David Simpson recognized the important role that family controlled businesses play in the Canadian economy, and became founding Director of Ivey’s Business Families Centre. As an operator in a family business himself, he supports learning in this vital sector of the Canadian economy and maintains a passion to promote this lifestyle choice.

Join David as he leads the discussion. Please note that space is limited to maximize the value to attending CEOs by ensuring a highly interactive environment.
Thursday, November 20th, 2008

10:30 am – 3:00 pm

The National Club

303 Bay Street,

Toronto

Bay Street & Adelaide, Downtown Toronto

Map Location & Parking
Cost
$148.00 + GST
To Register (Please note, business owners and CEOs only):
Please email: akobeleva@loewenpartners.com or call 416 961 0740 and ask for Anastassia

Agenda
10.30 am – 12:00 pm
David Simpson, The Richard Ivey School of Business, Business Families Centre - Welcome
Charles Loewen, C.P. Loewen Enterprises Ltd.
12:00 pm - 1:30 pm Networking and hot lunch
1:30 pm – 2:30 pm
Mark MacDonald, C.A. Bancorp
2:30 pm – 3:00 pm Networking

Gold Sponsor: Loewen & Partners works with private companies to raise growth capital. Our goal is to match owners of companies with suitable investors who understand the business and can add significant value. Over the past decade there has been a significant shift in the sources of financing available to small and medium-sized companies. This is primarily a result of the rise of private equity as the best place to access capital.

The Canadian Dollar is Ridiculously Undervalued

The storm is passing over according to a financial expert who called the Wall Street melt down in July, 2008.

"I think we're ending the financial crisis now," said Krishnamurthy Narayanan who studied under Paul Krugman at MIT and runs CI Global Opportunities Fund has returned 57 per cent in the past year, 19 per cent (compounded) over the past five. "
There will be countries, like the U.S., that will go into recession. But this need not be a global recession. And there are some encouraging signs on that front."
Narayanan was in Toronto and said he's buying Canada - the dollar, the oil, the companies. An excellent story in the Globe and Mail by Derek DeCloet ddecloet@globeandmail.com, October 25, 2008.

"The Canadian currency is ridiculously undervalued. I can't think of any country in
the world that has no fiscal deficit, no trade deficit and no inflation - except Canada. I think the Canadian dollar should go through parity. I like the whole Canadian market. I don't particularly dig the banks because I just don't know what's in there [on the balance sheet]. But I'd say virtually everything else is fine.

Canadian SMEs Need to Partner Up

"If Canadian companies want to survive the global economy, most current SMEs will need to find a partner to grow," said Jean Rene Halde, President and CEO of Business Development Bank of Canada. "Most SMEs - small and medium sized enterprises - are just going to need to get together with a competitor and partner."

Halde spoke to the Canadian Club of Toronto, October 20th, and explained that the new economy is no longer a small aquarium with room for many small fish. Imagine taking that aquarium to the ocean and now the fish can choose to stay in the glass box, even though the top is open? If they do leave their artificially safe old home, they will need to be a bigger size to avoid getting eaten.

With the Internet and global business borders, the world of commerce has jumped in size. SMEs will need to find suitable partners to buy. This next five years, companies will need to double or else close their doors. Find private equity to support your growth and help guide you out of your comfortable spot in the aquarium and out to the big sea.

Even Kevin Would Agree

I have been asked to blog for CBC's Dragons' Den, the Venture Capital reality TV show. It is a change from my usual writing style as the audience is different, so please take it with a big pinch of salt!

Every now and then, investors will take a punt. In other words, they put cash on a deal with the off-chance it may do well and spin off rich returns. This week, the Dragons played the lottery but also shared their appreciation for the finer elements of life – the Arts – by supporting two sensitive souls asking for $10,000 to complete their film project. Did these producers get lost on their way to the Canada Council for the Arts who gave a grant to the movie Young People F***ing. Then why not give a grant to a movie about a Canadian’s journey to the Playboy Mansion?
Of course, Dragon Arlene Dickinson grasped the marketing genius of these two artists who knew that by appearing on TV, they would build advance hype for their movie titled My Date with Hugh and expose it to a wider audience of highly intellectual and attractive Dragons’ Den viewers.
Dave, the producer, handed a card to the Dragons which had the list of movie stars appearing in the movie (I’m assuming in cameo roles). Suddenly, Dragons Kevin O’Leary and Robert Herjovec went into a feeding frenzy. But who’s names were on that list? Madonna’s soon to be released husband, Guy Ritchie? Perhaps Brad Pitt taking a break from Angelina and the kids? “Hi honey, I’m just stopping in to see some friends. Don’t wait up, love ya.”
That list also got W. Brett “Clint Eastwood” Wilson to briefly clench his jaw.
Brett approaches his deals like entering a bar room. He swaggers in, expressionless, and just when you think things are going swell, he whips out his six-shooter and blows holes in the deals. There went Herjovac’s offer of $25,000 for 25% of the business.
This left O’Leary spluttering, confused and annoyed,
“Why Brett, why? Why be a Bozo?”
Oh dear, using clown names on a big boy from Saskatchewan* – not good for building long lasting relationships. It just begs the question, did Kevin’s mother ever teach him about manners?
If you are pitching for capital and you find yourself in Dave’s delicious position of having investors start a bidding war, follow Arlene’s advise and ask what each investor group can do for you besides the money. Kevin claimed he had invested in a movie distribution company which made Dave rub his hands together and begin to drool, but Arlene warned that there was a strong whiff of bull manure in the air. Perhaps Kevin was invested in Disney - who knows - but Dave sure did not care and went with Kevin and Robert, leaving Arlene and Brett to twist in the wind. I suppose Kevin is more the target audience and Dave probably imagined himself having A Date with Kevin, drinking beers in his kitchen with the Explosion Bottlecaps and doing other manly pursuits. Yet, Arlene’s marketing ability may have created a more nuanced marketing campaign. Also, Kevin did confess to having an abysmal track record with movies.
There were two more artistic deals – fashion for plus-sized women and jewellery which Hollywood Stars are buying. What’s it with Hollywood? Why can’t we hear that Melinda Gates loved the necklaces?
When Cindy and Rina of Maximum Women described how they stay up into the middle of the night to make calls and do research, Jim Treliving appreciated that entrepreneurial craziness saying he did the same thing as he built his own business. Yet, Jim got the sense that Cindy and Rina knew what they were doing and cash would be used wisely. Arlene asked for 50% ownership, along with Brett and Big Jim. Despite the promise of long, dark, snowy Saskatchewan nights heating up with Brett stopping by for a hot chocolate beside the roaring fire, Cindy and Rina turned down the Dragons’ deal. Robert teased Arlene; finally, someone had stopped her from stealing their business.
The jewellery game is fickle and Kevin did a great job of questioning Rachel of Hillberg and Berk Jewellery but she convinced Brett to invest. The lesson here as that Rachel really knew her numbers which gave confidence that she was CEO material and not a one-product-person.
The best pitch came from Tom with dataSentinel who broke a laptop and then held out the USB key to access the up-to-date files stored safely on the Internet. Masterpiece Theatre could not have done it better and even someone with the abilities of a gherkin could understand Tom’s product. Too bad Robert broke the drama by saying the technology was already in the marketplace.
Bummer.
Robert asked if Tom had received government grant funding and when he confirmed this, Kevin asked for his tax money back.
The CBC and Dragons’ Den is also funded by tax dollars. As Brett pointed out, “This country is built by entrepreneurs” and with small and medium enterprises (SMEs) generating 60% of Canada's economic output and providing 80% of Canadian jobs. There is no doubt that the Dragons and the entrepreneurs who enter their Den teach a great deal about how investors reward innovation. If we want to strengthen our Canadian economy, the Dragons’ Den is a truly fantastic investment of tax dollars. I think even Kevin would agree.

*Mea Culpae: Brett is actually from Saskatchewan, not Alberta, as I have stated in past blogs.

J. B. Loewen raises capital for companies wanting to grow and is the author of Money Magnet: Attract Investors to Your Business.

You Made Money From That?

I've been asked to blog for Dragons' Den. Here is episode 4:

This week’s Dragons’s Den had me gripped – and it wasn’t just by the pitches but the interplay between the Dragons snapping at each other. As Robert Herjovic and Brett Wilson manoeuvred Marissa, owner of Moxie Trades, towards a deal, each of the Dragons took turns chipping at the opportunity. Kevin O’Leary had on his MBA professor hat, explaining how more products means way too much complexity for an early stage business. Unless Marissa sticks with shipping only boots, the SKUs (stock keeping units) will mushroom horribly and as Kevin said, “Marissa will find herself in the world of hurt”. Showing again why she gets paid the big bucks for marketing, Dragon Arlene Dickinson labelled Moxie Trades’ products for females in traditional male jobs as “badges of honour”. Brilliant - but before I could absorb this feel good moment, Kevin had kicked out with his hobnail boots of reality and inquired about the money. Ah yes, it always comes back to the money.
Brett Wilson picked up the theme and asked, “What is the margin on your boots?” When Marissa said around 30%, there were quite a few Dragons trying hard not to look too impressed. Kevin does know his industry metrics and let out that those margins were significant.
It was Big Jim Treliving who tipped over the Dragons’ negotiating table, telling Marissa not to make the deal, leaving Robert to blurt out with a blinding smile, “Damn you.” Gosh, Herjovac makes even his bad moments seem wonderful. He has enormous emotional intelligence in his dealings with people, particularly during awkward moments. Indeed, Robert gently asked Arlene to clarify after she said she did not want to do the deal with him. Actually, she meant the deal structure did not appeal. I also admire the way Robert sets out his boundaries telling other Dragons to make a deal or get out, but in the most charming way that only James Bond (or perhaps Robin Williams) could possibly top. No bridges were burnt with Marissa and we learn that this deal will return in a later show.
The Nails ‘n Martini presentation demonstrated how far you can get with investors when you realize that pitching is more about debate. Actually, the entrepreneur, Martin, approached pitching as a social encounter at The Devil’s Martini Club on Adelaide Street.
As you know, investors put money into people. With Martin, the Dragons recognized a positive, upbeat, outgoing personality and spent the time unpacking his concept even though he had neglected to do much of the work himself. You can see how the partnership between innovator and venture capitalist works. The Dragons bring financial competence, price out the dream and keep everyone grounded in realty. Big Jim is familiar with building a service business one city at a time and then moving down to the USA. Jim shared that the American market place is tough and that he got his “tail shot off.” This is exactly the kind of partner Martin should have in his business to guide him past the rocks and the hard place. Jim’s been there already.
Arlene told Martin she could drive a bus through his plan, particularly the costs. Martin dismissed her feedback saying he already gets money from his wealthy relatives. Hope they weren’t watching because my guess is that they will be putting a stop order on any more cheques. Martin reminds me of a teenager who racks up the calls on his parent’s cell phone and when the monthly bill arrives says, “Whaaaat? I didn’t know.”
Each week, the Dragons astonish me with their openness to listen to zany characters like Martin and to put their money into ventures. Innovation sure happens in strange, unbelievable places. Wouldn’t we all love to invest in a growing business and make money but how many of us could even spot a diamond in the rough? Last week, I was reminded of the crazy quirkiness of innovation at an entrepreneurs’ award ceremony. Lo and behold, the competition winner was a man who started on the streets of Montreal, walking on stilts while eating fire - Guy Laliberté, the founder of Cirque du Soleil.
Zut alors! Turns out, I worried needlessly about Brett Wilson’s sanity when he invested in Alison and her street circus business, Arial Angels. He may have actually done a pretty wicked deal by putting cash into what seemed a flimsy business concept. If a fire eater from Montreal can trade in his stilts for a business suit and finance partners – well, we can see that the world truly can become his stage.
Memo to Alison of Arial Angels: get hold of the book Blue Ocean Strategy which lays out how Cirque du Soleil reinvented the circus business model and beat the industry giant, Wringley Brothers. Then buy a navy blue suit and wear it. Robert Herjovic gave you the best advice for free – become a business person, do not remain an artist. Laliberté accepted his award wearing a suit and spoke about his financial partners, not a word about fire eating.
I’m becoming quite fond of Dragon Brett’s style and how his investment strategy involves so many elements around people, innovation, risk and reward. Maybe Big Jim should follow the Albertan instead of O’Leary. One thing I know: where there’s a Dragon’s Deal, it’s genius.

Jacoline Loewen is the author of Money Magnet.