Lets Talk Private Equity

I recently had the opportunity to interview the chairman of a mid-level private equity firm. Here's what he had to say about private equity, business degrees, and people skills.

Q: How did you find your way into this business?

A: I started my career as an attorney working on numerous types of mergers and acquisitions. I brought one of my clients into a deal based on my judgment and in turn made them about $350 million dollars. Soon after they asked me if I would be interested in starting a private investment firm with them and a few others. The rest as they say is history. We’ve been doing business for fourteen years now.

Q: It was tough to find much information out about your firm prior to our interview. Do you guys keep a pretty low profile?

A: We like to be mysterious. We find that being under the radar we are able to target the specific types of investments we want. When everyone knows about your firm you tend to get hundred of business plans and phone calls a week – most of them are exactly what you are not looking for.

Q: So how do you approach prospective businesses you may want to invest in?

A: Actually we don’t. We have a third party marketing firm create the initial marketing tools to contact prospective businesses. The reasoning behind this is that the marketing firm knows how to make us stand out from the crowd. If we just sent a letter out chances are it would get thrown away.

Q: How does communication play a role in what you do?

A: Communication is one of the most important aspects of this business. When we’re involved in a deal with a business and we need to find very specific people or resources, we are on the phones networking with everyone we know to find what we need. The interpersonal skills are invaluable in this business. We are a small firm so our ability to leverage our contacts and networking to find what we need is imperative.

Q: Leveraging resources is so important in this business. As a small firm, how are you guys competing with other firms how have so much more at their disposal?

A: We started a fund a few years back. We have social events for members to interact as peers and get involved. The events are huge for networking. People know what we’re investing in and since they have a stake they start sending us referrals for top-tier finance and management professionals we otherwise wouldn’t have known about. Since everyone has a stake in the investments people are eager to give us names and numbers. It makes getting your foot in the door that much easier. I can call a CEO and set a meeting. No gatekeepers, no voicemails.

Q: How do you primarily communicate with your team members and prospects?

A: I love email. While we do have a team, most of us are involved in specific things. One person usually stays somewhat involved as a back up person. Usually we keep each other informed primarily through email.

Q: One of the main documents you are giving me as a writing sample is the Letter of Intent. Can you tell me a little more about it?

A: The letter of intent is what we send businesses we are seriously interested in working with. It’s essentially a loose contract that formally states that both parties are interested in conducting business with each other. It’s very wordy and there is a reason for that. If we begin to work with a company and things go wrong before we commit [financially] we can get out of the contract. It’s important to build a back-door into everything. Sometimes things are not what they seem going into something.

Q: You graduated from Harvard Law School. Looking back, has a brand name like Harvard given you opportunities that other schools could not? Does the School make or break your options?

A: I’ve worked with people from all over that have been to top law schools and average law schools. Typically the person either has it or they don’t. The law school you go to doesn’t guarantee anything. I will say that going to Harvard provided me with excellent connections. All in all, going to a top school just makes it easier to get where you want to go.

Q: What’s some sound advice you would give to a business student who is on their way to graduating?

A: Two things come to mind. The first is to make sure you are very familiar with balance sheets and have a good financial background. A lot of people forget the basics. Don’t forget that stuff. Secondly, get solid experience. I can not count how many highly intelligent kids come out of top business schools with MBA’s but have no real experience.

New Network for Young Entrepreneurs

Today’s youth are emerging as entrepreneurial powerhouses, and more and more are putting new ideas into action. These entrepreneurs refuse to accept things for the way they are. They’re relentlessly trying to push new concepts and practices into the world. They’re young, motivated, and unparalleled given today’s vast amount of available technology and resources.

Under30CEO.com is the birth child of this “young entrepreneur” paradigm. A new social network geared primarily towards young entrepreneurs has emerged and is pushing the boundaries of social networking and interaction. My inherent first question was, “do we really need another social network?” I was sure I knew the answer to my somewhat rhetorical question. There’s so many networks out there all playing tug of war for users. It became clear soon after joining that even in its infancy, the guys at Under30 had asked themselves the very same question and vowed to make it clear that there is still plenty of space in the social network world.

“I remember when we first thought about this,” said co-founder Matt Wilson. “We all had finance, accounting, and business degrees, and graduation was coming up quick. Companies like KPMG and Price Waterhouse Coopers were recruiting from our class, but a few of us had this realization that the corporate job and lifestyle just wasn’t for us. We started thinking of a way to connect young entrepreneurs like us together to brainstorm and share resources.”

Under30CEO launched at the 2008 Collegiate Entrepreneurs Organization in Chicago, IL. The site is utilizing a wide range of media to build a library of essential resources for young people looking to start a business.

“Whenever people start these things, they’re thinking, OK, how can we drive as much traffic to the site as possible. That’s the wrong mindset. We want the type of users who keep coming back and want to contribute to the site. If we build a great user base, and the mindset is kept on producing valuable content the rest will fall into place,” Wilson said.

You can check out Under30 at www.under30ceo.com. For more information on Under30, or to explore sponsorship opportunities, contact Matt Wilson.

www.grantdeken.com

So You Want to Sell Advertising

Many people start sites with the preconceived notion that they can make tons of money by selling advertising. Don't be fooled, the road to riches is more detailed and complex than you know. For those of you moving forward, here are some tips for getting started.

What you need prior to selling anything is a detailed breakdown of your traffic. Understanding the types of visitors and members you have is going to be essential to successfully finding advertisers. You want a user base that is targeted, but not so targeted that you are limiting advertising prospects.

You need to know that in addition to users being interested in your site's primary focus, they are also within 'x' age range, 'x' income level, gender, etc. You absolutely need to understand figures such as bounce rates, the average time spent on your site, where the majority of traffic is coming from and the rate of growth/month.

Being that the economy is presumably slower than it was in the ad boom we saw about a year ago, you can be pretty sure that budgets for advertising are somewhat smaller. The rate of spending is still increasing, but at a slower rate than before. Because advertisers are a bit more cautious, a Pay Per Click (PPC) package may be more attractive, since the ROI is much more tangible.

CPM advertising (cost per thousand impressions) is the other alternative. Advertisers looking to maximize exposure in a specific market will likely flock to this option. Again though, the ROI is less tangible, and MOST companies, in my humble opinion, are looking at PPC options.

When you structure deals you want to emphasize the uniqueness of your audience and understand who your key prospective advertisers are going to be. Offer all encompassing advertising packages in addition to a single banner, like what you see on sites such as break.com, where a company gets the banner, in-video ad, and perhaps a "free offer" opportunity from the advertiser. Sponsorship is a great word to use and paradigm to embrace since it feels less "advertisy" to consumers.

Traffic: this will be a tough barrier to overcome given that you probably don't have start up capital to spend on advertising yourself. My suggestion is to structure a vigorous grass roots campaign Which is often much better for long term results and for generating a consistent user base.

Blogs are a great first step in spreading the word and building natural traffic. Submit value based content to article databases as well. Original videos are also an emerging tactic that can build viral traffic to your site. My suggestion is keep it somewhat short, and very funny. Humor is key. Submit releases to other websites that may have an interest in your site. Offer to write stories on other companies in order to get them to post your story on their blogs.

Be creative. The more creative you can be as far as distribution methods the better.

Be patient! Don't expect your traffic and page rank to skyrocket over night. But also know that the harder you work and the more time you put in, the faster you will see results.

Visit Grantdeken.com to get more ideas and information on how to boost your company's marketing efforts!

Jacksonville University Creating CEO's

The Davis College of Business is out to make a name for itself and this past weekend was no different. The College of Business, along with the JU entrepreneurship club, sent three students to the Collegiate Entrepreneur Organization’s annual conference in Chicago, Illinois.

Roughly 1,400 students, faculty, and entrepreneurs gathered together for three days of networking, workshops, and keynotes by some of today’s most prominent business leaders. “It was a rewarding experience to be surrounded by a group of people who have many of the same goals as you, that think the way you do,” said Grant Deken, a senior economics major and founder of a small marketing firm, Tangent Initiatives, LLC. “We came out of the conference with a different paradigm. The three of us feel energized and confident we can take our businesses and our organization to the next level.

The conference featured more than twenty workshops from basic concepts to more advanced subjects such as venture financing and search engine optimization. Veteran attendees competed in business plan and elevator pitch competitions for large cash prizes. “The workshops and keynotes were amazing,” Said JU Entrepreneurship Club president Chris Salley, “but the opportunity to network with peers and business leaders was truly invaluable. We are really thankful to have the support of Dr. Rossiter, Dean McCann, and the whole College of Business.”

The JU Entrepreneurship Club currently meets once a month and focuses on bringing in local entrepreneurs to discuss different aspects of starting and running a business. “We have big plans for our organization this year. We want to continue to bring in speakers, but also move towards bigger things, like competitions, more conference opportunities, and social entrepreneurship within the city,” Salley said. “Our organization encourages anyone interested in starting their own business to attend our events and meetings.”

If you would like more information about this topic or to schedule and interview with Grant Deken, please call him at 904.254.5768 or e-mail at Gdeken@jacksonville.edu

Collegiate Entrepreneurs Organization 2008 – Chicago, IL

It was like a breath of fresh air, being surrounded by 1,400 young, motivated, big thinking, wealth aspiring entrepreneurs. This year the Collegiate Entrepreneurs Organization hosted its annual conference in the heart of the windy city and between the speakers, the company, and the city, it did not disappoint.

Speakers like Robert Kiyosaki inspired and motivated us with stories of triumph and failure and most importantly, overcoming failures to go on to triumphs. As first time attendees to the conference, the experience was an unforgettable one. Advanced workshops gave insight into specific issues like venture capital, internet marketing, and understanding the importance of bootstrapping (and how to do it effectively). It was a hub of unbelievable resources for anyone aspiring to start a business or take theirs to the next level.

Now back in Jacksonville, I’m more ready than ever to continue with my plans to create a multi-million dollar enterprise. But it’s not all about the money, and that was a point of emphasis that CEO illustrated. The success of business allows us to think bigger, change the status quo faster, and access the needed resources to solve the world’s problems. It’s our responsibility to create jobs, find better sources of energy, and end the disease and hunger that millions of humans face every day.

So here’s my challenge to you. Stop what you’re doing and just think for a minute. Where do you want to be in five years? Do you want to be a millionaire? Do you want to help people? Even better, would you like to be a millionaire helping people? The questions are a bit rhetorical, but I sincerely hope you consider that entrepreneurship is the key that can open the door into a new world of thought and freedom. Can you work hard enough to obtain that? Do you want to?

Managing a Marketing and Sales Transformation

Authors: Joel Claret, Pierre Mauger, and Eric V. Roegner

The marketing environment is unprecedentedly changing and becoming more complex. The result is a need to reorganize brand portfolios, rethink spending approaches, generate more fine-grained customer insights, overhaul pricing and segment management, and restructure sales, service, and channel strategies. Each change is a challenge in its own right, and some companies are tackling more than one: GE, for example, has been trying simultaneously to improve the way it approaches innovation, brand management, and customer care. This level of change represents a commercial transformation—that is, a transformation of the company's broad-based marketing and sales elements.

It's difficult to carry off change of this magnitude at a brisk pace: deeply ingrained habits keep employees from embracing new techniques, skill-building efforts break down, and leaders lose focus. To counteract these problems, companies have developed a variety of change-management approaches, particularly in operations, where techniques such as Six Sigma and Total Quality Management (TQM) have flourished. Making change stick typically requires both planning and action—centering change on a powerful aspiration, establishing systems and processes that reinforce the goals of change, modifying mind-sets by creating a sense of shared purpose among employees, conducting targeted skill-building efforts, and creating role models for employees.¹ While such change-management practices are useful, they are difficult to apply to marketing and sales. One reason is that these organizations—encompassing brand managers, market researchers, and segment and channel managers, to name just a few—are more diverse and complex than the shop floors where many improvement programs take place. Figuring out how to keep disparate parts of the organization working together is a key challenge of change. Second, the rationale for transforming a marketing organization is often to jump-start growth. That requires creativity, not just strong execution, so the change effort is more difficult and the related decision making more complex. Finally, the responses of competitors and customers to marketing changes are difficult to predict, so it is hard to eliminate variability (a goal of many operations change efforts); maintaining flexibility is essential; and the establishment of goals and metrics is complicated.

In our experience, five critical ingredients of transformation are key to overcoming these issues (Exhibit 1):

1. Leadership, aspirations, conviction, and clarity of purpose: committed leadership that can bring together disparate parts of an organization to achieve an ambitious and clearly articulated aspiration
2. New ways of working: a combination of improved processes and tools that help make sense of complex information, redefined pivotal roles, and performance management that drives the transformation forward; together, these serve as the foundation of a commercial operating system that, when fully developed, improves consistency, coordination, insight, and decision making
3. Capability building: on-the-job apprenticeship and high-caliber coaching designed to upgrade critical skills while delivering results
4. Changes in mind-sets and behavior: necessary steps such as removing cultural barriers to change and developing a tailored set of interventions to shape behavior
5. Transformation design: an approach that delineates the scope of the journey of change and the support needed to meet its objectives

You can read the rest of this article and others at http://www.mckinseyquarterly.com

Grant

How Retailers Can Make the Best of a Slowdown

Moving quickly to improve performance can help retailers to recover faster.

Ashish A. Kotecha, Josh Leibowitz, and Ian MacKenzie

September 2008

Downturns are tough on retailers. Recent McKinsey research indicates that during the last two recessions (1990–91 and 2000–01), growth slowed for nearly every retail subsector in the United States. Ninety-three percent of the retailers surveyed that existed during both downturns experienced slowing revenue growth in one of them, and 59 percent endured it in both.¹

Unfortunately for retailers, their position on the front lines of consumer spending doesn’t translate into a rapid turnaround when the general economy experiences a subsequent uptick. The average retail subsector growth rate during the first year of recovery following the 1990–91 and 2000–01 downturns was 0.3 percent. And 12 of 15 retail sectors lagged behind even that rate of growth during one or both upturns.²

These downturn dynamics—declining sales followed by a sluggish recovery period—mean retailers should move quickly to minimize performance deterioration. The challenge, of course, is that retailers have a large number of options to sort through, ranging from cutting costs by shutting stores or restructuring support functions, to increasing revenue by refreshing stores or overhauling promotions. Many make the mistake of focusing on what is easy or known to them and fail to tackle more challenging goals that might improve their competitive positioning during the inevitable upturn.

In our experience, some basic rules of thumb are invaluable for helping retailers rapidly sort through their options and set priorities for action—in particular, determining whether to take an offensive or defensive approach. Combining a tough self-assessment with a hard-nosed scan of the environment can help retailers decide on the relative importance of reducing costs, increasing investments, creating financial flexibility, and seeking near-term revenue growth (exhibit).

Retailers should start by taking a rigorous look at the health of their balance sheets, management teams, and overall operating performance. Companies with reasonable cash reserves and ready access to credit lines, for instance, have options—such as investing in stores, people, or acquisitions—that weaker competitors simply lack.

At the same time, retailers need to be realistic about the potential of their businesses. Do they operate store formats or play in a subsector with strong growth prospects? To what extent is the market already saturated, and where does the retailer stand versus competitors? Recent growth rates, market penetration figures, and a serious review of the strengths and weaknesses of competitors are all important factors to consider.

Companies with good financial strength in markets with significant growth potential should lift investment to gain strategic advantage over competitors. Big bets, such as doubling down on new stores or remodeling old ones, are one possibility. Equally important are smaller bets, such as recruiting talent from weaker players or investing in more precise local market execution. For example, when one specialty retailer began suffering from declining foot traffic in its stores, the company built an analytic tool to help merchants and members of the central marketing organization more effectively use data from customer-relationship-management (CRM) and transaction databases. This allowed the retailer to better predict local demand and decide which items should receive how much space in its advertising circular. Comparable store sales have risen between two and four percent in test markets employing the new promotion-effectiveness tool.

Retailers with good financial health in mature industries can also go on the offensive, taking actions to quickly grow revenue by driving traffic into stores through more compelling offers and ensuring that staff is ready on the floor for the assisted sale. For example, a North American soft goods retailer has reversed declining sales, improved customer satisfaction, and increased the frequency and average size of transactions by focusing on eliminating out-of-stocks, raising the effectiveness of front-line salespeople, and making small store-layout changes that help customers find the goods they want.

Companies with weaker financial health will need to focus more aggressively on reducing costs. Our recent experience suggests that weak performers have major opportunities to rationalize inventory stock keeping units (SKUs)—freeing up working capital—and to renegotiate terms on direct sourcing. These companies can also increase shop-floor efficiency, an area where they frequently lag. By applying lean operations techniques to redeploy labor, they can shorten the time staff spend on noncustomer-facing tasks and increase the time spent helping customers. The focus should be on getting more from existing sales resources, not just on cutting labor hours. Indeed, the key driver of economics is sales—not just cost as a percentage of sales.

More broadly, retailers should bear in mind that the least effective thing to do during a downturn is to simply “hunker down” and “weather the storm.” Though there’s no escaping some pain, moving quickly to improve performance can reduce the odds of a deep dip in sales and position retailers to participate fully in the inevitable upturn.

Original Article: http://www.mckinseyquarterly.com/Retail_Consumer_Good/Strategy_Analysis How_retailers_can_make_the_best_of_a_slowdown_2188