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.

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!

Leverage Your Marketing Efforts

Today's economy is volatile and unpredictable. Markets feed off of each other like nothing before, and the world economy is one marketplace. Consumers today are smart. They research purchase options, talk with others, and can make or break a business. Understanding how to engage this marketplace changes is essential to being successful. However, complex problems tend to come with long complex answers and complex answer eat up precious time. So, for our purposes, I have shortened some simple small business recommendations into short, easy to understand strategies that every business should be actively engaging in.

1. Enterprise Branding - Many companies are doing an exceptional job branding at the micro level (product) but is missing the mark on creating an enterprise presence. Evolving your company's - not just product - brand is an essential part in growing the business and establishing a larger market presence.

2. Analytics and Email -

a. Leverage the internet by employing an email marketing initiative. You can use this to put your products in front of more people, more often while at the same time increase the availability of feedback and behavioral data from consumers. This will also help with enterprise branding, customer loyalty, and market exposure.

b. What are you currently spending on marketing and where is it going? Based on current pay per click (PPC) rates, what kind of turn over are you seeing. How leveraged are your key words respectively to the search volume of those key words?

c. Home Page - What is the click through rate on your home page? Bounce rate? Building high value content into your home page, such as product demo’s or a welcome video to captivate an audience will encourage a higher CLR and a lower Bounce rate. Ideally, to work in conjunction with enterprise branding, consider re-tooling your home page.

3. Economic Outlook - An economic slowdown will take a toll on businesses expecting U.S. retail to maintain its current pace. To hedge against losses, consider some of the following:

a. Inventory turn over - Has it gradually slowed? Keep less inventory on hand if so and more cash available.

b. International Markets - Consider putting your sites in multiple languages and buying country specific domain names (.cn - China, .se - Sweden, .uk - London). This can help you penetrate similar target markets in foreign countries. Be sure to do some thorough research to ensure you are marketing a product correctly given the cultural differences of foreign consumers. This is an ideal growth strategy (if done correctly) but can be even more rewarding when you need to find new channels of distribution due to economic slowdown.

These are some of the essentials that every business can employ with little real capital while at the same time seeing exceptional results.

Marketing in an Economic Downturn

CHICAGO--(BUSINESS WIRE)--According to a recent American Marketing Association (AMA) www.marketingpower.com survey, 60 percent of AMA member marketers believe that halting or reducing spending on key marketing programs is the biggest mistake marketers can make in an economic downturn. Marketers also report that focusing on short-term tactics and sticking to the status quo are some additional missteps marketers make.

“Our survey reinforces that these are challenging times to be a marketer,” said Nancy Costopulos, Chief Marketing Officer of the American Marketing Association. “Management is pressing for greater accountability from the marketing function, and the industry must rise to the challenge.”

Many marketers surveyed feel their greatest internal challenge is demonstrating the value of marketing when sales are decreasing. Other top internal issues include realigning marketing strategies to match business objectives and focusing on longer-term brand strategies.

To help the marketing community manage these mistakes and challenges, American Marketing Association offers the following four strategies to enhance marketing plans in a downturn: shape the message, don’t slash the price; focus on who NOT to target; stand apart from the crowd and invest in innovation; and sustain the brand.

1. Shape the Message, Don’t Slash the Price

“Focus on the company’s value to the market” – Anonymous survey respondent.

Survey Fact

Only 3 percent of American Marketing Association marketers believe that it is important for marketing functions to adjust pricing strategy to help sustain and grow business during an economic downturn.

Implications for Marketers

• Conduct research to understand your competitor’s positioning and your target audiences’ perception of the economic environment.
• Hone and refine your messages.
• Highlight the value of your product or service, rather than slashing the price.

2. Focus on Who NOT to Target

“Fish where [your] fish are” – Anonymous survey respondent.

Survey Fact

Sixty-seven percent of AMA marketers feel it is important to mitigate the impact of an economic downturn by refining target audiences.

Implications for Marketers

• Assess which segments of potential customers you do NOT want to target.
• Demarket to inappropriate market segments. Simply stated, some customers are more costly to serve than to lose.
• Focus marketing strategies on customer segments that will produce the greatest ROI.

3. Stand Apart from the Crowd and Invest in Innovation

“Major opportunities when others are cutting back” – Anonymous survey respondent.

Survey Fact

A majority of AMA marketers, 66 percent, report that they would take the same amount or less risk with a new product and/or service innovation during a time of economic uncertainty.

Implications for Marketers

• Differentiate through innovation with a product or service that performs in a faltering economy.
• Invest in R&D now to ensure your company is in a position to compete when the economy rebounds.

4. Sustain the Brand

“Sometimes it is the reeducation of a product [that can help sustain or grow a brand]” – Anonymous survey respondent.

Survey Fact

Sixty-three percent of marketers believe that they can lessen the impact of a downturn by investing in brand building, as part of their marketing plan.

Implications for Marketers

• Establish access to executive officers to understand ongoing shifts in business strategy.
• Realign marketing strategies to match business objectives quickly to demonstrate a commitment to the bottom line.
• Qualify and quantify results quarterly to establish an ongoing dialogue with executive officers.

“The key to success for marketers in this economy will be supporting the short term, and managing for the long term,” said Costopulos. “It is more important than ever that marketers simultaneously run a sprint and a marathon.”

Survey Methodology:

From May 6, 2008 through May 16, 2008, the American Marketing Association conducted online interviews with 244 AMA members in the continental United States. The sampling error associated with a sample size of 244 respondents is plus/minus six to seven percentage points at a 95 percent confidence level.

For an executive summary of the data, please contact Christine Heath at christine.heath@fleishman.com.

About the American Marketing Association

The American Marketing Association is the largest marketing association in North America. It is a professional association for individuals and organizations involved in the practice, teaching and study of marketing worldwide. It is also the source that marketers turn to every day to deepen their marketing expertise, elevate their careers, and, ultimately, achieve better results. American Marketing Association members are connected to a network of experienced marketers nearly 40,000 strong.

American Marketing Association offers highly acclaimed Training Series, professional conferences and Hot Topic events focused on the immediate needs of marketers, as well as trends shaping the future. American Marketing Association’s website, MarketingPower.com, is the everyday connection to marketing data, articles, case studies, best practices and a robust job bank. Additionally, the American Marketing Association is the source for the field’s top magazines and journals, including Marketing News. Through local and collegiate chapters, American Marketing Association members are connected with the best people and the best practices.

American Marketing Association is also the creator of Mplanet, the unparalleled industry event that brings together the world’s most creative thinkers, including senior marketing executives, top academicians and other thought leaders, to share fresh insights, new concepts, the latest research and solutions for the most pressing marketing challenges and opportunities. Mplanet 2009 will take place in Orlando, Florida, January 26-28, 2009.

For more information on the American Marketing Association or Mplanet 2009, please visit www.MarketingPower.com

Mobile Marketing - Could it be Cool?

The second I heard the words "Mobile Marketing" I thought of the spam box on my email, full of offers for free Ipods and get-a-way trips. My initial reaction to the concept of mobile marketing was quite negative and the future was looking bleak.

At last though, I thought, could there be a way to make mobile marketing valuable for consumers? I brain stormed a few examples and want to see what people think about using SMS in marketing strategies.

1) Airline Companies - This was the first example I thought of: Airliners. Southwest paved the way for paperless E-ticketing. Using text messages to notify customers that they can check in or perhaps sending a text about cheap rates in their area could boost revenues for the airliners and at the same save consumers money.

2) Ticketmaster.com - Receive a text message when tickets go on sale for that band you've been dying to see. I can't tell you how many times Rush has been to Jacksonville and I missed out on the show because I forgot! If I had been reminded to get those tickets I could have seen Neal Pert rock a ten minute drum solo!

3) CNBC - Text me the opening numbers of the NYSE, DOW, and NASDAQ. Be the wise guy at work who knows everything before everyone else. Sound smart and look good for clients and bosses and be the king of the water cooler. Oh yeah, CNBC can throw a few ads up - Not to mention grow their branding efforts.

Maybe mobile marketing isn't all bad? Maybe it's just change that I was afraid of. I hope that ad executives and marketing officers will stay creative and remember that the best way to gain and keep consumers under their guise is to keep providing them will good value. If I start getting spammed I'm going to take the high road - I'll sue somebody.