Family business is not a gift, it's an anvil

"The gift of a family business is not a gift, it is an anvil," says Tom Deans, family business owner and author of Every Family's Business. Tom reasons that second generation family businesses can slip in profits and by the third generation, the statistics tell the story, as only 10% of family businesses make that leap.
Tom agrees that a family business can pass along intellectual capital as well as the financial capital. He believes, though, that passion for living and having strong, family values count for a great deal more. Tom says, 'Wealth is not about passing along a business. It is about teaching the next generation about life lessons that matter."
The family business is a source of prosperity but if you can bring in private equity partners who are far more objective and performance driven, the business has a better chance of survival and growth. That is good for the employees and the Canadian economy. The wealth coming from the business can be put into a portfolio for the family and they have a better chance of keeping family relations the way they should be.
Strong family, strong life.
From speech given at Blakes law firm, Toronto.
Jacoline Loewen, expert in private equity for family business.

Event: Attracting Investors to Toronto Businesses

Monday, May 17, 2010 @ 6 PM

Ben McNally Books

366 Bay Street

 

Join the next Mayor of Toronto, Sarah Thomson, and author, Jacoline Loewen in a discussion: 

How Toronto Businesses Can Attract Investors

Jacoline Loewen is the CEO of Loewen & Partners, a private equity firm which helps companies finance their growth by finding and matching them up with investors.

Your Cost: $37.50
City Rebate Cheque: $112.50 (you will receive a cheque from the city)
Ticket Price: $150
$200 at the door (your cost $50 and City Rebate $150)
Please pre-register here: http://sarahthomson.ca/event/books-and-fundraiser

or contact Kinga Surma at 416-964-5850 to process payment
If you can't make it, but would like to make a donation to the Sarah Thomson Campaign for Mayor,
please click here: http://sarahthomson.ca/donate/

People do not buy what you do, but why you do it.

If you hire people who can do the job, they will work for your money, but if you hire people because what they believe in what you do, then they will give you their blood, sweat and tears.

You can hire the best minds that money can buy but if you are not passionate about why you are working as a team, you will not go as far. At the time of the Wright brothers who were trying to figure out how to fly, there was a competitor who we do not know, unless we do deep research. This man had the best minds from the top universities, tons of money and the newspapers following him around. In comparison, the Wright brothers had no money, not a single person on the team had a college education and the media ignored them. Wilbur and Orville's competitor was pursuing the riches and fame. The Wright brothers were driven by desire to take flight. The irony is that the day the Wilbur brothers took flight, there was no one there to witness this historic event. That same day the brothers took flight, their competitor quit. I found that shocking but it makes sense because he was seeking a hollow reward, the Wright brothers were seeking to soar into the sky in a flying machine not for fame, but for the sheer challenge. Imagine their pure joy rather than someone counting the financial riches.
This concept that customers buy why you do your company reminded me of Dani Reiss, owner of Canada Goose, a Canadian family business. Dani says, “Manufacturing is going to come back to Canada because consumers want authenticity. This is becoming increasingly important worldwide and people are taking more interest, not only in labour-friendly goods, but in iconic genuine brands with substance. We gained extensive manufacturing expertise making private label clothing. Learning a little bit from each brand helped us to create the best parkas on the planet."
Canada Goose has made Profit magazine's Next 100 as one of Canada's fastest-growing companies. Maybe Dani has a point about manufacturing?

People do not buy what you do, but why you do it. What do you believe?
Watch the video.

Jacoline Loewen, family business expert

Your actions add up to who you are today

This week’s Fast Friday leadership words of wisdom comes from the multi-talented Jacoline Loewen entrepreneur, author and triple A dynamo…

“Every action you take is like a grain of sand that adds up to who you are today.”

Only you can decide what actions you will take to shape the leader you want to be.  That’s a powerful thought.  What type of leader do you want to be?  What type of leader are you becoming? 

What actions can you take today to get you closer to where you want to be?

Happy leading!

Read more about Glain and her leadership series. 

There’s something really nice about family business when it works

Customers like family businesses and feel better about giving them their money, even — and in the US especially — if they are already stinking rich and famous. Family companies have a more direct relationship with their customers.

“We have an identity. At Four Seasons or Ritz-Carlton, there’s no one really to identify with,” says Ivanka Trump, daughter of the famous Donald Trump. “If someone has a complaint, they literally write ‘Dear Donald Trump’.”

Private equity likes family businesses too. Most private equity firms partner with a business for five years or less, and they like a mature company. The fourth generation Smucker who is also the CEO, told me that he does the day-to-day decision making but he has professional managers for running the value chain and private equity to assist with strategy and financial engineering. Once family business owners understand that they are the biggest asset, hey can relax and plan for the next generations to get involved, even if that means not being in the business but being the custodian of wealth. Coke, Wrigleys, Firestone are all family business brand names that have passed down generations and are run by professionals but families have control, ownership or a blend of the two. People trust family businesses and they are the celebrities of business.
The Trump family is teaching a whole new wave of what it means to be a family business. Being a famous family business also saves money on marketing. Trump SoHo gained instant prominence in 2006 when Trump unveiled it on The Apprentice. The Trumps do not need to pay celebrities to attend their glitzy launch parties because they are the celebrities. When a new building or hotel opens, Ivanka does a profile “here” or a photoshoot “there”. 

Even Don Jr pitches in. “I offer to get into the G-string, too. I’ll do whatever I can for the bottom line.” Trump’s brand strength also means he can license his name and manage hotels but get developers to pay for the construction. Trump is notorious for risking little of his own money upfront. And, of course, there is the F factor — family. 

As products of obscene wealth and self-absorbed, pathologically competitive parents whose marriage collapsed on the front pages, Don Jr, Ivanka and Eric are prime candidates for dysfunctional, useless brats. And even if they can write their names in the sand with a stick, can they work together? For every successful family firm out there — Walmart, Viacom, Rothschild — there’s a Gucci. The Florence-based fashion house imploded when relations between family members got so bad one tried to murder another.

So, how are they doing in SoHo? It is a Wednesday morning in Manhattan and Don Jr, Ivanka and Eric are meeting the Trump Hotels’ boss, Jim Petrus, for a hotel performance review. Rooms are shifting, but not at the $500-plus a night Trump had hoped to be able to charge. The rate is less than $400. But SoHo is near Wall Street and Petrus hopes to sign lucrative corporate accounts. “We’ve 32 signed,” he says, reeling off a list of most of the blue-chip banks. While hotel rooms are selling — at the right price — sales of condos in Trump SoHo are sluggish. In Trump Hotels there are usually some pure hotel rooms and some condos that buyers can use for a certain number of nights of the year. Only about a third of the 391 units in Trump SoHo “are now in contract”. Bank of America recently effectively wrote off a loan on the project for a fraction of its $75m face value.

Donald Trump Jr concedes that “the real-estate market is less than stellar”, but insists Trump is performing better than other developers. “We’ve refinanced debt and made deals with banks because we have a proven track record of success and because our product continually outperforms our competition.” He anticipates a boost in interest in condos in Trump SoHo now that the hotel is finally open. Few doubt the mini-Trumps’ determination to succeed. Listening to them, it is clear they have inherited their father’s creativity and determination — some would say ruthlessness — especially Ivanka. In a meeting to discuss hotel openings, it is she who says that any outside firm contracted to Trump must agree to put up its employees at Trump properties when they travel. “When I send them their first cheque, I’m like, ‘By the way, as part of your retainer, you’re gonna give us all your people!’” Later, the conversation turns to a client who needs “a smack”.

The top Trumps are so steeped in business that at times they say bonkers things. Asked how his wife, the model Vanessa Haydon, feels about him being away from home up to three weeks a month, Don Jr replies that she knew his schedule before she married him, or as he puts it, “She bought with full disclosure,” as if his wife were a Park Avenue building he had just closed on.

It is no surprise that they should act this way. It is all they have ever known. The Trumps were schooled in business before they started going to school itself. “From a very young age, my father would say, ‘Remember, don’t trust anyone,’” Don Jr recalls. “That sounded weird to a four-year-old. To test me, he would follow up with, ‘Do you trust me?’ I’d say, ‘Yes. You’re my dad.’ He’d say, ‘You’re an idiot!’” Later Don Jr began touring buildings with his father. “We never played catch or ball, but I saw him complain about ceiling heights.”

Don Jr, Ivanka  another family business grows. Donald Trump is the daddy — and the boss. Donald Jr, Ivanka and Eric, his children, are his real-life apprentices. He wants them to take over his business. Will he end up telling them: ‘You’re fired!’

Read full article:
Jacoline Loewn, author of Money Magnet, how to attract investors to your business. Watch interview Financial Post, John Turley-Ewart.

How to Deal with Financing

I recommend ReadWriteStart which makes book recommendations. ReadWriteStart's Chris Cameron talks about how the website, "has resources and tips for young companies looking to raise funding from venture capitals and angel investors. This week's recommendation for our Weekend Reading series, Money Magnet: How to Attract Investors to Your Business by Jacoline Loewen, is a book aimed at helping entrepreneurs learn how to deal with financing and how to make their businesses attractive to investors."

Book this week: "Author Jacoline Loewen is a Canadian business consultant and strategy writer who has aided companies seeking capital and private equity. In Money Magnet, Loewen provides valuable lessons she has learned from her career on raising capital in a style that is "informative, relaxed and easy to understand."

Read more.

3 steps to take if Private Equity has not replied to your Resume

Needing a Financial Analyst number cruncher to take over a challenging role left by one of my employees who has returned home to China, I began a search. I received an overwhelming response, probably because it is spring of a terrible drought in jobs; and we are in the cutting edge industry of private equity.
Many MBA graduates also have sugar plum salaries dancing in their heads that are just not the reality on the Street.
I had the resumes for a month, I went away on vacation and thought I had got return emails covered by one of the staff. I was wrong, the emails had not been sent.
When I returned, I received a scathingly rude email from a young man incensed by my greed and how I had not replied to his request to get the job. At first I thought, "Ah, this must be a number-oriented young man who is obviously challenged in his inter-personal skills. Good point that he made about getting back to him."
I took that input, even though the reasons he gave were not my intent at all.
That young man rushed to give me his views on why I was not replying to his email. In his judgement, which he revealed in great detail in his email, I was worse than the greedy Wall Street Robber Barons. I could imaging spittle flying from his mouth as he laid out the injustice of it all to me. He would teach me a lesson that I did not know as I was blinded by greed.
Oh dear. It was just that I had bumped into one of those trade-offs in career. I had taken a long vacation with my family, and it cost me productivity in my business. If this young man had just inquired and prodded me politely, he would have found out why the silence.
Here is a great Harvard Business School tip of the day for this young man; perhaps it will help with his future job search:
Link to HBS

Silence is the worst kind of feedback — it is ambiguous and generic. When you don't know why someone hasn't called you back or responded to your email, it is all too easy to assume the worst. Here are 3 steps to take if you're getting the silent treatment: Accept that you don't know. Acknowledge that you don't know what the silence really means. Resist the temptation to fill in the blanks with your own insecurities. Ask for clarity. Reach out to the person and ask him to tell you why he's not responding. Believe the answer. Whatever the response — he was too busy, he forgot — don't read between the lines. Accept it as truth and move on. Jacoline Loewen, Money Magnet, Attracting Investors to Your Business

Is consulting borrowing your watch to tell you the time?

Do consultants actually add to your bottom line with their additional work inside your company?
Watch video
The Lords of Strategy is a good read on whether thought leaders add value to a business and this is an interview with the author, Howard.Kiechel.
It is hard to remember a time  when business did not have strategy but it was only developed in the Seventies. It was the first time they had a systematic way to look a their customers and their processes, along with their costs.
Concepts have developed further and it is so common now for companies to have a strategy, that we overlook how powerful it can be. Michael Porter was the first to create a strategy course as part of the MBA curriculum.
Now, strategy is more specific and granular looking at specifics.
Strategic planning is now not the big plan; it is more adaptive and looks at how to change more quickly. Strategy has fought between the strategy number people and the strategy people people. Tom Peters lead the camp focussed on people and has now gained the same recognition.
Strategy has a place still. Companies have a difficult time asking and the big three strategy questions:

1. Who is your customer?
2. Who are your competitors and 
3. What are your costs?

These three still stand as the big three questions that every company needs to discuss. The Big 3 Car companies in the US stopped asking on all three and look at where their results are compared to twenty years ago.
The best consultants are those that are either great on the people element or are looking for the patterns and pushing to ask the right big three questions.
http://blogs.hbr.org/video/2010/03/the-secret-origins-of-corporat.html
Jacoline Loewen, author of Money Magnet, Attracting Private Equity to your Business.

Private Equity pulling through recession in better shape

Private equity-backed companies seem to be pulling through the financial crisis in better shape than other comparable business, especially issuers of speculative grade or high-yield debt offerings, according to a study from the Private Equity Council (PEC). (Read more.)
The study measured the annualized default rate for more than 3,200 private equity-backed companies acquired between 2000 and 2009 and held through 2008 to 2009, which is where the PEC bracketed the recession. The default rate for those companies reached 2.8% in that time, compared to 6.2% for other firms.
During the recession, the majority of the transactions that eventually defaulted involved little to no leverage, according to the study.
The report challenges other studies done by Moody’s Investor Service and Standard & Poor’s (S&P) suggesting that “overleveraged” portfolio companies held default rates several times higher than their peers.
In The Buyout of America,  author Josh Kosman suggested such woes would be similar to the subprime meltdown. Kosman writes that the private-equity market would bust when more than $1trn in debt comes due between 2012 and 2015. Another study done by Boston Consulting Group (BCG) in 2008 forecasted that almost half of the world’s private equity-backed companies would default.
According to PEC, the BCG study “significantly overstated the problem,” and default rates register roughly 30% below its projections.
Ouch!

Who makes the lion's share of profits?

Having just spent time at Ivey Business School, it reminded me of my MBA days and how we all dreamed we would change the world...or at least change a business. One of the reasons I was driven to go to business school was because early on in my career, I met two Ivey MBAs who were finding tanking businesses, raising some private money from wealthy Bay Street lawyers or traders, and using the cash to get the banks off the flagging businesses' backs.
I hung on every word as these two men described how their work added jobs to businesses, revived business owners and breathed new life into products and processes. I could see their excitement and I wanted to do the same sort of work.
I was intrigued by the difference a cash injection of equity would make. Once the business owner and team  were no longer answering calls from the bank, they could get the business back to the challenge of finding and serving clients - paying clients. As the energy flowed back to marketing and service delivery, it would be like a massive log jam freeing up, suddenly returning the river to a confident flow. So many companies need that financial reprieve to gather themselves and get the business back to doing what it excels at doing--and I don't care who you are, no CEO enjoys looking for capital when the business is struggling. There's no worse confidence drainer.
Back to those 2 MBA guys I admired--it was their ethics of seeing the business owner move up the business to a new level or re-finding their edge. This joy is working as a team clearly was their magic sauce to their success. When I visit private equity firms today, I want to see that same secret sauce as they talk about current portfolio companies. I want to hear their pleasure in working as a team to take a company to a new level. It is easier to find Private Equity who can ramp up processes, but the culture and attitude is rarer.
McKinsey & Co studied the financial success of private equity firms and discovered that in fact, only the top 20% of private equity funds make the lion's share of profits. True to their style of quality research, Sacha Gaie at McKinsey dug deeper and came up with a range of activities the good Private Equity firms practiced and it did come down to strategy and other team work. The study did not have a specific measure for team work or ethics or pure good spirits in dealing with each other, but if that could be quantified, it would explain a great deal of who succeeds and who gets to go home broke.
My two Ivey MBA heroes went on to be top of the industry which is now known as private equity. I always held them up as my guide to how to work with others. I went to business school to learn more of their skils and I find it ironic that without seeking it on purpose, I am in that fantastic industry called private equity hopefully helping business owners and CEOs reach their dreams.