As investors to a company, you consideration is not necessarily how much the average person in the company gets paid. In the attachments to the annual report, the top compensation is given to all shareholders and you expect the company to pay what is necessary to maintain its ability to continually make profits. The issue of employees leaving is the cost of people voluntary leaving too high. If a person leaves the process is a new one needs to be hired ( first looking through the pool of qualified people), interview sessions, and attempting to pick the best one for the job. The next cost is training the person so they are capable to do the job they have been hired to do, it ranges the expectations are it may take a month to 6 months of training once hired. In the HR department, there are resources needed to be used in selecting people.

Understanding in all jobs in the company, people will leave, some sooner than others. The reason why they leave is the issue of the book The 7 Hidden Reasons Employees Leave by Leigh Branham, American Management Association, NY, 2012. The first issue to look at is turnover of employees – if a company has 300 employees with an average salary of $35,000 and turnover of 15% or 45 people, the cost to the employer is $1,575,000. The cost to recruit is about 1 x salary. If the turnover could be reduced because in 31 cases or 70% were fixable, the savings is $1,100,000 per year. In addition when there is less turnover, it can mean the workforce is more productive, less absent from work and more gets done. The issue for investors is why do people voluntary leave a company and is there something the company can do which it is not doing to ensure people stay longer and work harder?

The first concern is what should be the acceptable cost of turnover, given that there will be something, because no company is perfect for every individual. We also know the baby boom group is moving through increasing numbers of retirement, which means keeping talent or people will be a larger issue for many companies as there will be shortage of bodies. The first thing to acknowledge is generally companies do a good job in the hiring stage, it is after the hiring where most turnover is avoidable. Exit surveys reveal many left from something the company is doing or not doing and most of the issues do not relate to pay. Pay is something everyone working for somebody else wants more, but most learn to live off what they get paid. In the great recession we have seen people work long hours for 2 or 3 companies because at one they do not get enough hours at the first job. The issue then is not people wanting to work but to make enough to satisfy their daily needs of the family. The issue of senior management and management managing their departments plays a greater role than pay, and that is something that is fixable.

The 7 Hidden reasons are:

1. The job or workplace was not as promised.

2, There was a mismatch between job and person.

3. There was too little coaching and feedback.

4. There was too few growth and advancement opportunities.

5. Workers felt devalued and unrecognized.

6. There was stress from overwork, conflict and work-life imbalance.

7. Works had lost trust and confidence in senior leaders.

more in part 2 and 3

Linking to dividend paying stocks, there is a saying, People join companies, but they leave managers. If you think about your career, eventually you will come to the same conclusion because similar to school there were teachers you liked better than others. If you have worked for people, there have been managers you liked better than others. The ones you liked better, you were likely more productive; the ones you did not like you likely looked around at other companies or departments or something. From an investor point of view, the issue is what costs are we accepting as investors and what costs can be reduced. If turnover is too high and thus costing too much and there are savings which can be done with reduced turnover, more effective management, then an investor you want to know and what is the company doing about it.

There are more questions than answers, till the next time – to raising questions

If you ever had a child, one of the most important aspects to them was the naming. A good name helps them through life. It is same in the business world, picking a name helps the business, the wrong name and customers will be confused with the company and go somewhere else. Two people who help companies name their companies are Steve Rivkin and Fraser Sutherland who wrote the book The Making of a Name – the Inside Story of the Brands We Buy, Oxford University Press, NY, 2004. The authors write about a wide variety of company names and when reading them you will likely stay they make sense and what else would they have chosen? Then the authors tell you of the names that did not make it, until they were changed. Often names look similar because in the example of the mutual funds industry – funds with names such as Growth, Large will draw more money to them even if it the performance does not match the name.  Choose wisely for the name of your organization. By choosing a name – the company in all its operations will “live” that name – from stationary, websites, employee communications, business forms, business affairs, listings and certificates, advertising and promotions, signage to drawing people to work for the company.

A good name shows that a company knows what it is doing and has a firm and focused fix on what it is offering to the public. A good name will answer yes to the following questions about new products – is a specific need fulfilled? is it really an improvement over what already exists? it is easier to use than what already exists? is it safer than what already exists? is there a competitive point of difference?   A good name is also the answer to another question: How will you bring your idea to life? In making a brand name or trade name thrive no single good element of a product exists in isolation. Overlapping, interweaving, they all work together. What all the elements share is an ability to make the customer recall the name.

In today’s world, the English language is not the only language to consider. Many companies have gone to countries around the world to discover their wonderful brand name in the English speaking world, means something very different to the public in other countries. Then a problem is faced on what to do? Picking the correct name for many geographic areas is a difficult task, which is why there are lots of examples of companies getting it right and getting it wrong or needing a name change.

Linking to dividend paying stocks, over time the public has accepted the name of the company and rewarded it well. Similar to all companies, there is always innovation or new products to come up with – partly because we all like new and partly because it allows the company to gear up for the yearly sales campaign. The author once worked for a company that was very traditional and changed its image to new age – the logo were the right colours to compete …. The company changed nothing else in the way they operated and once the President was removed (his decision) the new President changed everything back to where it was before. The company felt better to work for. The name and logo matters to the customers both internal and external.

There are more questions than answers, till the next time – to raising questions

Another movie which is about an underdog beating the established, in this case a corrupt establishment is The Cross of Fire. The DVD was released in 2006 and stared John Heard, Mel Harris, David Morse and Lloyd Bridges. The setting is during the 1920’s and times of Prohibition in the State of Indiana. The organizer of the KKK in Indiana wants to put on a kinder, gentler face rather than the traditional white robe. The KKK was the sponsor of orphanages, community centers, gave baskets to the poorest citizens and was seen as a good organization. Being seen as good, membership rose to over 75% of Indiana citizens were members in good standing. The leader was very power hungry, but fell for the wrong girl. Of all the women in Indiana, he fell for the close friend of an attorney for the state. He eventually savagely beats her and her death results. The odds are stacked against the attorney – the KKK has overwhelming support in the rural areas; the leader is a close friend of the political establishment; the leader lives in mansion and seemingly has access to wide resources; the leader is seen by many to be a good man. The attorney takes the lady’s statement (as impartially as he can) and the battle in the courtroom is set.

The attorney has never tried big cases before, but then no one wanted to help in this case. It is found out, the leader of the KKK is actually a drunk, part of the reason for getting the money was he was working with the bootleggers. The bootleggers not the KKK were actually paying the bills. Slowly the tide begins to turn and the leader’s arrogance is seen and a swift decline before the final result and resulting non renewals of membership. In the 1920’s membership was over 6 million, shortly after the trial, the membership was 200,000.

Linking to dividend paying stocks, as a profitable company, part of being successful is the trust of the public. Trust the value of the products and services or given the monopoly like position, it stays close to a monopoly. If it is a monopoly like position, the government can open the market to alternatives and there is always alternatives. If the leadership is arrogant or seen to be, as shareholders you want to vote against them because they will upset the apple cart one way or another.

There are more questions than answers, till the next time – to raising questions

Every once in a while the underdog succeeds and the movie No is about an underdog succeeding. The country of Chile in South America is location for the movie for the President, Augusto Pinochet, was in power for 15 years and wanted to extend his reign; but he needed the public to vote – the vote was either Yes or No. In the prior 15 years, Chile had zero votes and public dissent was met by police or internal agencies who applied torture or water cannons or batons or locked away people for a week or longer and sometimes the person did not come out alive. Into that context was the ability to have a say. In the movie No released in 2012 by Sony staring Gael Garcia Bernal, not surprisingly, the organizers of the No campaign were watched. Both No and Yes sides had 15 minutes an evening on Chile National TV to do their campaign, technically the other 23.5 hours were for the Yes side. In the overwhelming political controlled environment, with few resources but creativity, the No side through the optimism of Hope and the need to change the management won. Chile’s President was changed without bloodshed.

Linking to dividend paying stocks, at times it will feel the dividend paying companies are the established ones, however in order to keep paying a dividend they have need to have campaigns of hope. They need to be seen as a start up – having optimism for the future, serving their customers, listening to their customers and not being too arrogant. Prior to the internet, it took considerable more resources to take on an established organization, now it needs a group of driven people with access to computers or any small business. A number of years ago, the author was involved with a political campaign with $15,000 and the other side had over $500,000 to work with. We won, because we were right, nimble and driven to work harder than the well funded campaign. It just meant the team shared information more freely than the other side did – if you agree with us go to our website download the material and work in your neighbourhood, town or city, just let us know what your are doing. As long as the dividend paying company is tuned to its customers, the reason for alternatives will be limited, otherwise look to alternative companies.

There are more questions than answers, till the next time – to raising questions

There is an interesting book about financing using private equity titled Money Magnet – How to Attract Investors to Your Business by J.B. Loewen, John Wiley & Sons, Toronto, 2008. The book was written because the author noticed some business grow not necessarily they are better than others, but some grow because they know how to access money or capital.

The book and others similar to it has many checklists of what investors are going to be asking and expecting. There are remarkably few shortcuts when trying to assess money and everyone is asking similar type of questions. If you or you know someone who is going through the process of looking for money, they need to ensure their presentation answers the known questions. Similarly if someone is interviewing for a job, there are some known questions which will be asked. Not being prepared, not being ready speaks volumes. The difference is the people on both sides – investors tend to concentrate on companies that have made them money in the past as they understand the market. Therefore a presentation which does not use the resources of books such as this one deserve to fail. The answers are different based on the business and where it sees itself, how it fits into the marketplace and where it sees the future going. The great thing about business is the direction signs are all over the place, and only in hindsight do you see who was most correct.

The last insight is the private equity is looking for a minimum number of deals with the expectations of growing them for 6 years and selling out the position. The 4 questions they are really searching are: 1. are you the right people to make this happen? – why you? what is the hunger in your belly? how does your team handle bumps in the road? 2. what is the business opportunity? why are people going to pay? market size? 3. is it sustainable? why are you better than the competition? how do your expect your competitors to react? and 4. what is the return on investment for investors? private equity invests money for others – they are expecting better than index funds, why you?what is the value of your business? how am I going to sell my position?

Linking to dividend paying stocks, the checklists are good for your analysis for when you buy a dividend paying company you will want to know why the company can and continues to pay a dividend. How does it keep its market position giving the competition or alternatives which exist. Does the company focus on a broad or segmented market? For part of the reason to buying dividend paying companies is the first rule of investing – try not to lose money. The less you lose, the more you make over the long run.

There are more questions than answers, till the next time – to raising questions.

Another choice is to look at private equity for financing. There is an interesting book about the subject called Money Magnet – How to Attract Investors to Your Business by J.B. Loewen, John Wiley & Sons, Toronto, 2008. The book was written because the author noticed some business grow not necessarily they are better than others, but some grow because they know how to access money or capital.

In most things in life, it is important to understand the stages of the process before sending business plans to every private equity company. Somebody may take ask for an interview, but chances are better if you target investors who fit your business first. As the owner, you must understand what type of business you have and the size of it. Where is the company on the business curve? How much money, besides more, do you wish to raise. The Types of financing are seed, start-up, angel, venture capital, growth capital, mezzanine/debt financing, traditional banking and bridge financing. Each of these types of investors is distinctive in their risk tolerance and expectations of you. The corresponding types of businesses are early operating company, high-growth, first-stage financing, if you wish to consolidate, if you are established with revenues, if you want the public market. Remember those with revenues and companies that can be seen to be enlarged or scaled up are the best candidates for money.

You have a meeting and your business plan follows the guidelines and match the purpose – the name of the company describing your business – other side thinks does it? the team – do they have the skills necessary? the need – is there enough of burning need for your solution? your proposal – can you fill the need? is there a WOW factor? the product – what is your sales? what are the alternatives? the revenue model – are the cash flow projections fair? the market – can this business scale up? competition – why are you better than the rest? barriers or risks – what is your competitive advantage? go-to-market strategy – how quickly can you reach the market? milestones matched – do you do what you say you are going to do? target milestones – what will you do with the money and expected targets you will meet? financial data – it is investable business with ability to generate above average returns? investment highlights – what 3 points do you want investors to remember?   All the above starts with a meeting and the investors are assessing your grasp of the business, your confidence in running it and you. The purpose  of the first meeting is start the conversation for the average time to gain hold of the money is 3 to 4 months.

Linking to dividend paying stocks, the starting point of your analysis is easier because you are looking at profitable companies which pay a dividend. You will want to go through similar questions and remember when venture capital companies make a decision it takes 3 months. While you are likely not buying greater than 5% of the company, you need to take your time. If you analysis indicates the company should continue to pay a dividend, the stocks will go up and down or fluctuate so waiting can be a good thing based on your outlook for the markets.

There are more questions than answers, till the next time – to raising questions

You are in business, it makes money which is a good thing. You will have choices one is to keep the business more or less at the same level and that can be a very good decision. If you own the building and the real estate over time becomes more valuable, staying profitable but small or medium sized can be very rewarding. The other choice is to expand or grow the business. If you choose to do that, you will need to attract money. One choice is to go to the banks whom you have dealt with, if you feel the bankers know your business and can help move to the next level(s) then it is a good choice. Another choice is to look at private equity for financing. There is a well written book about the subject called Money Magnet – How to Attract Investors to Your Business by J.B. Loewen, John Wiley & Sons, Toronto, 2008. The book was written because the author noticed some business grow not necessarily they are better than others, but some grow because they know how to access money or capital.

Private equity is privately-held money invested into privately-owned companies that are not listed on the stock market. The money will be active as the managers try to improve the business, help it grow and eventually sell their stake. Private money can have longer time lines than the bank (3 to 6 years) and after they are looking to sell either back to the owner, other partners or outside insiders including an offering into the stock markets. It depends on where the growth and potential growth takes them. The private equity group will use their resources to help you grow to the next level and beyond.

In many ways Private Equity is similar to the shows Shark Tank or Dragon’s Den in which people ask for money and part of the value is what the investor can bring. You can try the shows or other organizations similar version of them. There are local people, one will find a bias of people towards either a type of business or location, but private equity means a financial partner with skin in the game or a piece of your business. The reason to try private equity is you will find passionate people wanting to grow the business.

If you move toward using Private Equity, the most important aspect will be to change your management style to want to work with them. 80% of deals are turndown because of attitude of the person making the pitch. You started your business because you are head strong, to grow your business takes skills of listening, feedback and working with others. As the business grows, you management style needs to change from knowing everything to delegating responsibilities. The advantage to change will be the new owners bring a network of people, knowledge of operations, cost shavings and support and strategy as well as money to your business. They want you to succeed.

Linking to dividend paying companies, the ones making the profits are the targets because in the field people like competition. Shareholders like monopoly like conditions when it benefits them. Your dividend paying companies has to pay attention to what the competition is doing and where it is vulnerable or could shore up its offerings. Often times private equity in the nature of Hedge Funds will take a position in dividend paying companies to push the stock price up to give more to shareholders. Sometimes you will like them, sometimes you will not.

There are more questions than answers, till then next time – to raising questions

When you think about restaurants, many will think about afternoon and evening food, there is money to be made in the breakfast and lunch segment. One such company is Cora which has over 140 restaurants in Canada. Recently the founder received the Veune Clicquot award. Veuve Clicquot is a champagne company which was run by Madame Clicquot Ponsardin after her husband died. The award has been given since 1972 to women around the world. Recently Cora Mussely Tsouflidou the founder of Cora’s Breakfast and Lunch chain was honoured. Incidentally there is a book about Cora called Breakfast with Cora by Cora Tsouflidou, McArthur & Company, Toronto, 2010. The story is a lady needing a job after her marriage ended in divorce and starting a diner to survive. The cost to start was low, but the food and atmosphere which came from the diner was exceptional. Very soon many people became regulars and after a few years, the demand to open a second and a third and then a fourth and then to franchise became a reality.

Why was this restaurant exceptional, and other diners just a relatively inexpensive place to eat? Part of the story is the founder and her ability to listen, learn, and be creative. Part of it was early on, she decided to focus on breakfast and lunch from there the eggs, crepes, French toast and other basics could be adapted with fresh fruit. The menu would be adapted to things the customers wanted which would translate into new dishes. In every business, particularly a small business, how the owner stays energizer is the big thing. For Cora after the restaurant closes she would go to other areas of the city to see the foods from around the world. Ideas and combinations would occur to her.

It is easier to manage a one or two store operation, as the business grows and your customers continue to be repeat business, the expectation of operational systems are in place or will consumer time. With the operational systems in place the possibility of growing even more or taking advantage of the opportunities that come forward.

Cora writes that to make a decision she never wants to rush the decision – taking time to reflect, study and then do. It is easier with a small operation.  Each decision while not always a major one carries the risk of being wrong. Not rushing is a rule for her – sleep on it. Do you see how the decision takes shape in doing or not positive. When you have little resources, you do not want to waste them, A good line from the book is I do not waste money that I have not earned yet.

One of Cora’s biggest concerns was fear. At first it was fear of making a living, then it became a fear of expanding. There is no doubt it is tough, but you need to believe in success. The truth is the events in our lives never unfold exactly as we expect or we plan them. This upsets us as we are not in control. Cora’s message is decide that is not how things are going to be. Change the way you look at things, see the glass half full (all the things you did well, there will always be things that can be improve on); roll up your sleeves and continue. Business is not a roll of the dice, or not luck it is a matter of commitment. Your success depends on giving your body and soul to do it and that is why you should love what you do. Your success will be in all the little things you do on a daily basis. You have to do the little things right and listen to your customers,

Linking to dividend paying stocks, it hard to succeed in business because it has be done consistently year and year out, but there are companies doing that and they are achieving profits. The profits help push up the price of the stock and if they have enough profits they can continually pay dividends, This makes life easier if you start with these types of companies. In your research you will see which ones do the little things right and listen to their customers to enhance the value they receive from the transaction.

There are more questions than answers, till the next time – to raising questions.

Where you look around, people have stuff. Stuff they need to live, stuff they hope to use and stuff that when the are deceased 97% will go into the trash. If you look at homeless people they have stuff; people rent storage lockers for stuff that will not fit into their homes. It is the reason why at least once a year, magazines will have articles on how to declutter. In theory, there is less and less reasons to keep paper – it can be scanned and put on the cloud and you can access even easier. In practice, many of us still have stuff. One book on the subject is Clutter’s Last Stand by Don Aslett published by Adams Media, Avon, Mass, 2005. First edition published in 1984. Mr. Aslett’s book is filled with helpful hints such as we only regularly use 20% of the stuff we have, is it possible to reduce the other 80%. In this day and age, if you only need something for a limited time, renting is an option. By keeping something it ages, if you keep it for long enough it will be an antique, the bigger question is there a market to buy it from you and recover the costs of keeping? If there is no market, do you really want to hold on to it? If you have not worn clothing in 10 years, we all have our favourites, should they be let go? No one says it is easy and if you ever had a fire, you would miss some of the stuff, but be thankful people are safe and healthy.

Linking to dividend paying stocks, part of the reason for the subject is sometimes as investors we accumulate lots of investments. Unfortunately, some people accumulate investments that is doubles and triplicate of their primary holdings. Many of us hold Mutual Funds as well as individual stocks, if you thought you were diversifying are the objectives of the funds similar? Besides to make more money, are they following similar paths? Perhaps you should sell them with limited loss to yourself (every year you can redeem some with no penalty) and really diversify your holdings.

There are more questions than answers, till the next time – to raising questions