The risk to family business when bringing in a professional manager

Family-owned companies present special challenges to those who run them. The reason? They can be quirky, developing unique cultures and procedures as they grow and mature. 

That's fine, as long as they continue to be managed by people who are steeped in the traditions, or at least able to adapt to them. But what happens when a firm grows to a point that it must hire outside professional help to remain competitive? That can be a difficult task for all involved. Just ask Melanie Kau.

It was a spring morning early in May 2008 and Melanie Kau had just concluded a meeting with her buying team at Mobilia Interiors Inc., a family-owned retail chain specializing in imported designer furniture. Kau, the president of the Montreal-based company, usually enjoyed these meetings. Sourcing the products that filled Mobilia's stores had been one of her favourite tasks ever since she joined the firm in the mid-1980s. Today, however, she was feeling some regrets. Not the that the meeting had gone poorly. Kau had called her buying team together to begin discussing their plans for Mobilia's spring 2009 product line-up, and the talk had been quite rewarding. What bothered Kau came at the end. As she was gathering her papers, she glanced at her schedule. The next two weeks were packed solid -- and not with the important sourcing strategy sessions that she so enjoyed.

Kau sighed. As her company had grown, so had the complexity of the issues she was required to manage. Once, she could spend up to 50% of her time on buying activities, a key differentiator for Mobilia. In recent years, that figure had dwindled to 10%, crowded out by other commitments to operations, finance and human resources. Kau was determined to unclog her schedule so that she could concentrate on the parts of the business that mattered most to her. The question was, how? The most obvious answer would be to hire a dedicated operations executive, preferably one with experience at a large company. There would be a double benefit

to such a move. Not only would Kau be able to delegate some of her duties -- freeing up time to focus on purchasing and sourcing -- she would also be giving herself the opportunity to hire someone who could bring problem-solving skills and best practices to Mobilia. The trick would be finding and training the right candidate, someone who would have the requisite combination of experience and a willingness to work in a family-owned enterprise steeped in its own culture. That was a tall order and getting it right would mean the difference between success and failure.

Kau's father, Hans, founded Mobilia in 1959, launching it from a single boutique above a grocery store. He soon developed a reputation for innovative business practices, something that became ingrained in the company culture. In the 1980s, for instance, Mobilia became the first Canadian retailer to import affordable furniture covered in Italian leather, a luxury that had traditionally been available only to well-heeled shoppers. A decade later, it became a Canadian pioneer of the big-box format for furniture stores.

Mobilia's growth continued under Melanie Kau's leadership. In her first 10 years as president, starting in 1996, she quadrupled the company's sales and opened nine new stores, adding close to 180,000 square feet of showroom space in Montreal, Ottawa and Toronto. The accolades followed, with Kau earning a spot on Caldwell Partners' prestigious "Top 40 Under 40" annual list.

As Mobilia grew, Kau found herself frequently mulling over the idea of hiring an operations executive. But each time, she decided against it after an analysis of the situation. She had always found ways to manage her increasing workload, whether it be making meetings shorter, increasing the time between follow-up meetings or dividing work up amongst her team. By early 2008, however, the demands placed on Kau had simply become too much. Her workload had essentially doubled in the past eight years, and there was little left she could do to lighten the load. It was becoming increasingly apparent that she would have to bring in executive help, probably sooner rather than later.

The were several issues with this decision, however. For starters, a hire would be expensive, as a successful candidate would expect a six-figure salary -- money that would come straight off Mobilia's bottom line. Training a new executive would also take time. It would be weeks, even months, before Kau knew whether her investment was paying off. More significantly, Kau was reluctant to bring in a person who hadn't risen through Mobilia's ranks. Even though the firm was almost 50 years old, it was still a family business, and most of the senior employees had been promoted into their current positions. All were familiar with the company's history and unique culture. Any new executive that Kau might hire would need to be sensitive to that environment. Complicating matters, Kau would not be looking for someone who would merely act as a "caretaker" executive overseeing existing procedures. Kau wanted someone who could take an active role in remodelling Mobilia's systems and processes to make the company more efficient.

All told, Kau knew that bringing in a new person -- especially someone with new ideas about best practices -- would be difficult. Mobilia employees and managers would be asked to change the way they had been doing things. Making successful transitions would require much patience from everyone involved. Productivity would likely fall during the initial stages of the transition as employees shook off old habits and adapted to new procedures. There was also a risk that best practices introduced by a new executive wouldn't work at Mobilia, due to subtle differences between the company itself and the firms where the new best practices had been developed. Kau would have to trust the operations executive to make judgment calls about what was right for her firm.

Lastly, Kau was concerned that an outside executive coming into Mobilia, a fast-growing firm, would likely exhibit strong, entrepreneurial traits -- just the kind of person who might one day strike out their own and become a competitor. Kau wanted someone who would be loyal to Mobilia. Would she be able to find someone who was just "entrepreneurial enough?"

For all the challenges, the thought of hiring a veteran executive still appealed to Kau: She simply had too much work on here plate. Even if there were risks, Kau knew that the status quo was not acceptable. Something had to change. What she needed most was confidence in knowing that she would make the right decision.

THE EXPERT VIEW

By Jacoline Loewen,

Partner Loewen & Partners and author Money Magnet

Kau should be concerned about hiring an outside executive. Yet, if I were on her board, I'd be concerned that her time is skewed away from the sourcing of product -- Mobilia's competitive advantage -- which she does very well. Her effectiveness is weakened because of an operations bottleneck, which may cost Mobilia its hard-earned market position.

First, Kau ought to make it a practice to ask for advice from mentors, other business owners or even a regular advisory group. CEOs need networks of peers that they can access to discuss business challenges and explore solutions.

Second, Kau is concerned about paying a high salary to attract a top professional. She need not worry. The recession has put talent on the market. By offering a moderate salary to a mature professional, someone experienced in family business, along with the opportunity to buy a stake in the company, Kau can preserve cash flow. If the executive is good, Mobilia's profit margin will improve, thus increasing the value of the executive's equity.

Finally, one of the characteristics I consider when assessing the strength of a company is the ownership structure. If all the shares rest with one "rugged individual," it shows a family business is still in its infantile stage, even if the revenue is strong. That desire to hold on to equity is a common trait in entrepreneurs. Even Sam Walton initially resisted sharing equity in Wal-Mart. But Walton quickly saw the results when he shared profits, and then equity with his executives and team. I think Kau would enjoy a similar experience.

Read more: http://www.financialpost.com/scripts/story.html?id=2176257#ixzz0of8GKwee
Stewart Thornhill, National Post 

What qualities do private equity investors look for?

In addition to an outstanding management team and the firm’s performance at the transaction time, investors need to have confidence that the firm’s value is likely to increase after closing. The way a CEO communicates to the investor counts. Eric Burke, founder of Torquest Private Equity, pointed out that “investors never buy the hockey stick scenario”. If your company’s earnings have been steady in the last while but you are telling an investor that you expect earnings to go up rapidly like the shape of a hockey stick after a major capital investment, you need to provide solid information and reasonable assumptions to back up your projections.


Ultimately, an attractive deal to an investor is a business that has multiple competitive advantages that together act as a spring board to increase profits within a reasonable time frame, say 3 to 5 years. Truly outstanding competitive advantages are often unobvious to casual observers. Therefore, you as the CEO or your agent need to communicate to investors in a convincing way what the competitive advantages are and why they will be sustainable.
Jacoline Loewen, author Money Magnet

Ivey CEO Roundtable for Family Business Owners

The Ivey Business School has the Center for Family Business and David Simpson often joins with Loewen Partners to bring together family business owners for regular discussions. This time, family business owners will be discussing how private equity can work well with family business owners and survive for many generations.
The speakers are private equity experts who are Canadian but working in the US.

What Business Owners Should Know
American Investors – What They Want and How They are Different

Find out what American investors are looking for from Canadian companies and how they work with entrepreneurs north of the border. Gain insight from Canadian investment professionals working in the U.S. for American firms. Learn about their lessons and experiences.

Join us for a peer-to-peer conversation with leaders from the world of private capital as investors and entrepreneurs share their knowledge of private equity investing and cross border mergers and acquisitions activity.

Speakers

What Does American Money Seek in Canadian Companies & How Does It Work?

Monitor Clipper Partners, Boston – Bill Young, Founding and Managing Partner

As a professional engineer, Bill Young brings a practical enthusiasm to companies in Monitor Clipper Partners’ portfolio. Bill has worked with Monitor since 1989. He was a founding partner of Westbourne Management Group in Toronto, Canada, providing management services to companies requiring turnarounds. Bill began his career as a design engineer with Imperial Oil, Canada. Bill holds an M.B.A. with Distinction from the Harvard Business School and a B.A. with Honours from Queen’s University in Kingston, Ontario. Venue: The National Club, Toronto tickets $150 http//www.loewenpartners.com

7 Reasons Why Strategic Planning Can Fail

When the Japanese shocked the American car industry back in the Seventies, everyone wanted to study their strategy and methods. Surprisingly, the Japanese had embraced the American Total Quality Management methodology by Dr. Deming which had been turned down by American manufacturers. When I received Max Carbone's description of strategy, I was reminded of Dr. Deming and his TQM framework which had as the last step of the cycle - celebrate! Read below Max's comments on strategy and Number 7. I rarely see this point made in business. 

1.  Weak Market Insights

Many leaders and teams engage in strategic planning without having sufficient knowledge about market needs and competitive position.  Having independent research to identify what your customers want, what they think of your firm and how you compare to your competitors is invaluable to know what your game plan needs to be.

2.  Lack of Shared Vision & Values

Leaders that don't invest the time to craft their vision and values will inevitably have teams who waste precious energy by working at cross purposes.  Successful investors, business leaders and management gurus all agree that winning teams develop and live by a common vision and set of values to drive results. 

3.  Unfocused Targets

Leaders, individuals or teams without focused, quantified goals tend to drift and simply don't achieve what they are capable of.  Crafting an agreed upon set of goals, strategies and actions by any team is the best way to realize business potential.

4.  No Accountability

It's great to come up with a plan, but without holding team members accountable to one another, even an exceptional plan is likely to fail.  Having a disciplined process in place to ensure accountability will significantly improve performance. 

5.  Poor Implementation

Studies show that high performing teams must be in the top quartile of performance as determined by their customers to achieve exceptional results.  Creating a culture where great implementation is expected is an imperative for any business leader.

6.  Inappropriate Behavior

Surprisingly, more than 25% of team members in any company may have the education and experience, but the simply don't have the right psychological behavioral profile to play their position!  Leaders need to know the profile of their team to ensure they have the ability to perform in their role.

7.  No Fun, Adventure or Spirit

Finally, the best game plans need to be engaging, fun and adventurous.  Building a positive team spirit is probably the most important and challenging work of any leader.  Making business fun is what the greatest leaders do.  It may be the greatest single attribute between a strategic plan that works and one that doesn't.


Max Carbone, Teamworks.416.721.6359 

The Power of Iconic Brands - New Owner of Brooks Brothers Tells It All

“Put away your work, I have arranged for you to go to Brooks Brothers and choose a new shirt for the summer.” Imagine if your boss said that to you this Friday? Would you be motivated come Monday morning?

The American brand has arrived in Toronto, and upon walking across sisal mats trimmed with khaki borders and seeing slipper chairs with crisp white cotton covers, I knew this was authentic colonial style at its best.  My brother-in-law, a Brooks Brothers walking advertisement, always told me that Ralph Lauren was a poor man’s version of the Brooks Brothers brand, and once you visit the Toronto store, it is tough to look at the polo symbol the same way again.

Brooks Brothers was rescued from the bungled mis-management of Marks & Spencers by an Italian named Claudio Del Vecchio. What could an Italian add to Brooks Brothers – Gucci flash, Versace shock value? Would we see Madonna in blue seersucker now, clutching a massive silver trophy provocatively?  I was curious and jumped at the chance to attend a family business evening held at the Brookes Brothers store by the Chairman and CEO.  Claudio Del Vecchio demonstrated elegance you only find on the Continent, combined with Oliver & Bonacini serving up amuse-bouches all evening and the opportunity to experience the store - what a smart evening.

As Evan Thompson, representing Family Firm Institute, put it, "Brooks Brothers is an icon." 

Claudio picked up this theme and spoke about understanding the essence of a brand. His early years working in his family business, creating and achieving the globalization an eye-glass empire, gave him the foundation to know how to speak to the client, but then act to bring in their requests. I could see that Claudio was humble despite his global success, and loved to know how to thrill his core clients. He respects the brand of Brooks Brothers' smell of New York Wall Street success and money, but I could sense a whole new level of style elegance, lifting it from staid to - yes - Italian elegance. When I checked out the magazine, there was a great article with photographs on how to combine shirts and ties which I showed to my teenage sons, who actually spent a few minutes discussing how to dress well. Remarkable! Now that is smart brand management and Claudio’s quest for stylish perfection is being appreciated by my family's next generation. That is a legacy brand - truly an icon.

Jacoline Loewen, expert in family business and author of Money Magnet: Attracting Investors to Your Business. Invited to family business event by family business estate planning leader: Glenn M. Davis, LL.B., MTI, TEP, Principal Mercer, glenn.davis@mercer.com  www.mercer.ca

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.

The Best Resume for Private Equity

It is now popular to land a private equity job which makes your first point of entry—your resume—all the more important. Lack of understanding about what are the attractive points will be picked up and could eliminate you from the running. Whether you're applying to a middle-market firm or one of the largest PE firms -- it's worth taking the time to scour over the details with a fine toothed comb. For a PE job, even one spelling error will get your resume tossed by the first level screener.

Something most job applicants do not realize is that even the largest PE firms are small in size, it's important to come across as a potential fit to each particular firm by truly understanding the demands. Every firm has a different culture and what they view as requirements for candidates .

Making matters more complicated, "a private equity resume has to go into a lot more details because you have to demonstrate results," says Jacoline Loewen, author of Money Magnet, who creates resumes for job seekers. Once you've gathered all of the details, keep in mind that your resume can be longer than the traditional one-page resume -- provided the information is necessary.

Here are some more tips on getting all of those details right:

Tailor to Fund’s Industry Focus
Private Equity firms focusing on specific industries, it's important to highlight your involvement by tailoring your resume to each company and position. Check out their website and look up their portfoli companies. Then build your resume to show where you have related experience. With so many applicants, Private Equity funds have the choice of making sure the people they hire have specific industry experience. "Having a couple of different versions of a resume isn't a bad thing," Loewen says. For example, if you're applying to a private equity firm that focuses on construction, it's important to have a resume that covers details from any previous experience.

Stress Financial Modeling Experience
To demonstrate your financial modeling experience, mention the results of the analysis performed and the area where it was applied when writing bullet points for your job descriptions. Adding any advanced-level Excel work can be another helpful way to demonstrate your expertise.  Private Equity does not want to train employees on how to do the bells and whistles of modelling. Thy do want to see that you adore number crunching.
Demonstrate Deal Experience
Whether you've worked on deal origination or oversaw a portfolio, demonstrating deal experience during your previous employment is key. Attract attention by setting apart the types of deals you worked on in a separate section at the top of your resume. When recruiters or hiring managers pick up your resume, deal experience will be the first thing they notice. You can also add additional competencies to the top portion of your resume then follow with a reverse chronological format to make the resume semi-functional and loaded with keywords for electronic screening.
List Other Interests
Personality-defining hobbies or activities can increase your chances of landing a job at many PE firms particularly if they reflect the interests of those in the Fund already. The performance-driven culture can create a stressful work environment so hiring managers look for candidates that will fit such a demanding culture. Don't ever underestimate the 'additional info' section of your resume. Include something that's not necessarily academic, a lot of the times people want to talk about that. Favorite sports teams or unusual hobbies listed on a resume can often spark a conversation and help your resume standout.
Don't Exaggerate
When a junior-level applicant puts in their resume that they single-handedly led a multibillion dollar transaction that raises a red flag about the rest of their resume. It is smarter to be accurate about how your role and what specific tasks you accomplished.  Additionally, many recruiters compare your resume to your LinkedIn profile to further track discrepancies.
Boost Your Education
Even if you didn't get an M.B.A. from Ivey Business School, having the name of a good business school on your resume can help. Consider attending an executive education program or a certificate program at a good business school that focuses on furthering your private equity career like investment management. MBAs are becoming run-of-the-mill and other financial degrees will add more, such as the Certified Financial Analyst or CFA. This additional degree separates the wheat from the chaff when it comes to the  private equity skill set. You have to be able to number crunch and an MBA is not really designed to build that skill set. The CFA, in comparison, does just that.

What is the ultimate objective of every private equity investment?

 The ultimate objective for every private equity investment a Private Equity firm undertakes is to create a company that produces superior products or services and operates efficiently to maximize financial growth.
To repeat that in language that the entrepreneur understands: The goal is to help companies grow.
If you want to grow your business, you have to state "Our company will grow at a xyz rate" as a corporate goal, and you have to get everyone on your business knowing this is the goal. After that, define the growth rate at 21%, or whatever you want, and why.
Give a reason for the growth rate. Do you want to be Toronto's best, Ontario's best or the world's best make of toys? Spin Master gave their vision out to public view and set an aggressive growth target. They wanted to be the world's best toy company and to make $500,000M revenue. Then they went for it. 
Spin Master is now a $900,000M revenue company and are a Canadian success story. To think that they began by making little faces out of stockings and when you added water, grass grew out of their heads. Remember those?

Are entrepreneurs a little crazy?

Kevin O'Leary of Dragons' Den fame, but also a savvy investor and a strong entrepreneur, got my attention when he said he likes to look at the deals where the people are a little crazy. Kevin says, "Crazy as a fox."
Why would that be? Kevin says it means they are thinking outside of the box and will push that much harder to succeed.
At a recent Women's Post event where I was invited to present for the Courage to Lead series, I mentioned the "crazy" part. My co-panelists agreed whole heartedly but I also received a great deal of feedback that so many business owners believe this to be true about themselves.
I received a letter from Licious owner, Joan Embury, who said, "Your comments on "a little crazy" resonated as how many of us have not thought that of ourselves and our businesses at some point; particularly before dropping off to sleep in a state of exhaustion and anxiety. We don't have to go and get committed."
So, let's go and be a bit crazy!

What tipped it for the winning team at IBK Ivey Business Plan Competition?

Sitting in an Ivey conference room this weekend, for the final judges' deliberation over who would win the IBK Ivey Business plan competition, I was struck by the passion of the private equity people in Canada. Peter Frisella of Tech Capital was smart, Deryk Smith of Edgestone was open and Albert Behr was his usual punchy self and had his son along too. The IBK family team was there, son Michael White is curious and Matt Hall from Covington gave his piercing assessment. Jason Zan from Rogers was in the same MBA year as Spin Master's Anton Rabie who spoke the previous evening.

I joked that there should be a prize for best judge too. We talk about about how that elusive concept of passion makes a person get through the bad stretches of business and push to the finals, but these private equity experts were top of class. 

We went over the merits of each of the three finalist plans. Which one would earn back money? How much potential money was also the big sticking point as one was a medical device put forward by a group of superb engineers and if this went through FDA approval, would be a great revenue spinner. The other was a software web application which could get sold quickly, but for $5M to $7M, waaaaaay less than a medical device. This company and was already making $25,000 a month in revenues and many judges expressed concern that it was an easy-to-replicate widget. The presenters were also engineers - memo to my two sons, please study your math and science.

We went around the table and listened to the one expert medical investor and then we voted. It was very close but what tipped it?

The quality of the presentation and PowerPoint. 

The two lead products were very different. Both could push forward and do well but only one could get the cash that day. When we added in the quality of presentation, the widget won.

I spoke to both groups afterwards and was impressed with the integrity - too often these business plan competitions attract scammers looking to get some quick money. Seriously. Althought not in this category, many of the presenters were also presenting at other competitions, like TIE. They make a business of entering business plans which I guess is a good way to get seed cash. So it is good to see that the real entrepreneurs who have that passion get the dough.

As for the private equity judges at the IBK Ivey Business Plan event, these are all seriously good people with entrepreneurism running through their veins. It's was a great weekend for Canada.

Well done to the student organizers: Navtej Sidhu and Karamdeep Nijjar. Karamdeep is going to be working with iNovia Capital  and Navtej is currently job hunting. I would recommend them highly as they were professional, warm and  absolutely in control of the whole schedule of the conference. Quite the roll-out! You can reach them at Ivey Business School.

What Does it Take to Rebound? Event coming up in Toronto

What does it take to rebound?
This question will be unpacked by one of my favourite private equity hires - Tricor Pacific's pick for CEO of one of their portfolio companies - CPI Card Group. The CEO is Anna Rossetti and she has experience in card solutions, microprocessor cards and chips - she will talk about Canadian Tire and other companies too.
Loewen & Partners is putting on this event with Rotman's Womens Programs at Miller Thomson's offices, 5:30, Tuesday 13th. John Turner may be there to open the talk.
Come by to learn more about Rotman's prgrams for women and to talk about private equity with Anna. Rossinni and Jacoline Loewen. The Miller Thomson team will be there and they are helping a wide range of companies. One of the IBK Ivey business plan winners told us that their patent lawyer was Miller Thomson.
Hope to see you.
Jacoline Loewen, author of Money Magnet, Attracting Investors to Your Business

Ron Close is Canada's Larry King

Larry King said that being a great interviewer was very difficult and when the CNN "talent" was in the same room with the "suits", you could see why talent was paid the big bucks. Ron Close, entrepreneur and star professor at Ivey, is one of those rare "suits" who also is talented at bringing out the real lessons of how much it takes to be an entrepreneur. He has inspired me to keep pushing the rock up the hill and did so again when he interviewed Anton Rabie, founder of Spin Masters, at IBK Ivey Business Plan competition.

Ron asked, "What book works for you?"

When Anton replied, "Richard Bransom's Screw It, Let's Do It," Ron insisted on going deeper.

"Yeah, the 9 Rules that are great to turn back to but which one is the top rule for you, Anton?"

And here we got to learn that this entrepreneur how much he spends understanding himself, working to develop his strengths and deal with his weaknesses. Anton told us he writes down his mistakes he makes and looks at these to remind himself. 

I really dug that because we have such a culture of "think you are great and you WILL be great." 

Taking the time to write down your mistakes and go back and review these does make you grow. It gives you something to do with your issues and let's these become valuable lessons learnt.

In my creative writing sessions at Humber, I write down what people have said are problems with my story. When I read these points months later, only then do I get the lessons. Applying it to business makes sense.

Anton also does 360's with his staff which is bold, brave and builds a high trust culture. He will not have The Emporer's Clothes syndrome where he is surrounded by "yes" men, telling him what he wants to hear. I would find Anton scary to work for but also incredibly stimulating. Ron Close gave us the opportunity of hearing the inside workings of building a business, warts and all.

Why Mission Statements can miss so badly

I want to show you quickly how to avoid writing a weak Mission Statement. Too many of them are so look-alike which is what makes them OK but not likely to attract the talent you want or give a potential client an impressive snapshot of what you company actually does.
Let's say you have a business you started at the kitchen table making bread and it has now grown into a growing concern with employees, a proper office, professional kitchen and --the big dream that makes you breathless--Lablaws as a client. You may decide your mission statement could go like this: "We aim to delight the families of Ontario with our awesome bread inspired by true Italian baking." That's not bad and your employees could get enthusiastic about it. Now here's where things go bad.

You gather your team and Board around the table to get their input on the wording. Captain Picard always made this gathering of the team look easy but it never turns out that way. Your team, who you think is better than sliced bread, turn into your eighth grade English teacher - you know, the one who nitpicked over every word you wrote. Suddenly, even the finance people have a opinion and are piping up to let you know their view:
"We should not limit ourselves to Ontario and by the way, I don't like the word delight. It seems flaky and frilly, way too girly." 

Thanks, Pierre.

"And saying 'families' may offend, what about people who live by themselves or who are divorced? That could upset them." Indeed. They could run crying from the room at reruns of the Cosby Show too, but point taken. 

As you go around the room, the babble of voices gets higher and higher.

"Why limit ourselves to Italian?" 

"It's weird but when I see the word "Awesome", I think of my kids. It's such an overused word. Isn't the main feature our freshness--we should say fresh, not awesome."

"But everyone expects freshness. It should be crusty or light--our crusty, fluffy bread."

"Hang on! Why limit ourselves to bread? We are doing rolls too. In fact, our rolls are moving up to fast selling category."

"Good point--we don't want to limit ourselves to bread. What if we move into frozen dough or pizza? We've also been toying with  flat breads. That's a very attractive business."

"Let's sum it up - what are we doing? We are providing a solution. A family eating solution."

"Hey, didn't you hear what I said about families? But solutions is exactly what we offer. Make it solutions."

Then Winnie says, "What about green? We are an environmentally aware company?"

"And we care for our employees."

"We really care."

How can you argue against hugging your employees, trying to respect the environment and having amazing values? So, there you go. It's added into the statement. There you have it: solutions for mealtimes and we care for our employees very much and also the environemnt. We are very green.

Maybe the team is happy but you know it is trying to be too many things to too many people.

Better keep your statement simple, you can put the list of values into a whole separate statement. That will help you avoid the trap here--getting so vague and fancy with the language that it just becomes meaningless. Here are 2 ways to avoid it:

1. Use concrete language. 

My favorite Mission Statement is done by Spin Master. Their vision is to be the world's most innovative, most fun children's entertainment company. There's their big, bold vision that has driven them from zero to $900 million dollars in just fifteen years. They take all the rest of the details and put it under values. Spin Master values - entrepreneural spirit, ideas (no matter where they come from), integrity (always, no fooling).
Wow. It gives you a picture of what they do and tells you why it's worth doing AND, after reading that, I want to work there.

2. Talk about the why.

Most mission statements are all statement and no mission. The whole point is to say why you're doing what you're doing. What makes you care? Look at the start of Johnson & Johson's famous credo: "Our first responsibility is to the doctors, nurses, and patients, mothers and fathers and all others who use our products and services." That is very clear about their priorities.

So you've seen why bad mission statements happen and two tips for making yours different. At our home Web site, I've put together some other resources for you to check out, if you're interested. And in the meantime, let me challenge you to do the impossible: Write a mission statement that means something. And I'll give you a hint: keep it real.

Jacoline Loewen, author Money Magnet, attract private equity to your business. Get in touch to talk about your Mission Statement.

Top 2 Reasons a Family Business will survive

Family businesses are often thought of as ma and pop stores, but this is far from the facts. I remember my surprise at learning the true number of family businesses in Canada and America.
McKinsey has released the results of family business research and it is well worth a read. According to McKinsey, the two top reasons for family business being able to survive is first of all - bringing in professional management and, second, having family stay committed to the concept of family legacy. No surprise there but bringing in professional management is still such a difficult barrier to pass for too many family businesses.
Here is the McKinsey article summary:

Definition of family businesses: a family owns a significant share and can influence important decisions, particularly the election of the chairman and CEO.

As family businesses expand from their entrepreneurial beginnings, they face unique performance and governance challenges. The generations that follow the founder, for example, may insist on running the company even though they are not suited for the job. And as the number of family shareholders increases exponentially generation by generation, with few actually working in the business, the commitment to carry on as owners can’t be taken for granted. Indeed, less than 30 percent of family businesses survive into the third generation of family ownership. Those that do, however, tend to perform well over time compared with their corporate peers, according to recent McKinsey research. Their performance suggests that they have a story of interest not only to family businesses around the world, of various sizes and in various stages of development, but also to companies with other forms of ownership.

Read more.
Jacoline Loewen, author of Money Magnet, How to attract private equity to your business

Toronto Entrepreneurs will share their secrets

THE EVENT: Courage to Lead
What to Expect

Wouldn't you like to pick up the phone and ask Warren Buffet his secrets to running a business? The next best thing is getting inspired by some home grown entrepreneurs, not in Buffet's league by any means, but who are building businesses to last. Three amazing Toronto business entrepreneurs are speaking in Toronto tomorrow night downtown, and you can pick up a few ideas as well as share a glass of wine. 

• Brenda Bot, of Salad Creations Canada; 
• Jacoline Loewen, of Loewen and Partners, Private Equity; and 
• Susan Hodkinson, of Soberman LLP. 

Join these owners to discuss what it takes to run a business and what you can expect when you are your own boss. Womens Post is running Courage to Lead and its a great opportunity to meet the people behind the magazine. Tickets are only $10, and that includes wine and appetizers and a great take away tote.

Wed 24th, evening

Tickets: $10 and include wine and food and a takeaway. 

Location: McNally's Bookstore, Bay Street, Toronto, across from The Bay, between Richmond and Adelaide.