Top 3 Challenges Business Leaders Repeatedly Neglect to Face

Today I met with a business coach.  He's created a roundtable of CEO's and business owners who've been getting together monthly for the last several years. 

When asked what the top 3 challenges he sees clients repeatedly make, he answered without hesitation the following, in order:

1. No written plan,

2. Managing growth or contraction in navigating a volatile up/down cycle in the economy,

3. Leading people and managing personnel issues within the company.

Are You a Creator or a Reactor?

The Important Distinction The stock market may go up - or down. But according to Jim Collins, that isn't the key distinction. Regardless of the market, what matters is whether you are a creator who is internally driven or a reactor who takes cues from the outside.

Creator Internally driven, externally aware Pursues creative strategy Discovers genetic talents and applies them Builds an economic engine to get things done Many once-in-a-lifetime opportunities Growth follows from creative contribution Ambitious first and foremost for the work Focuses on building relationships Values self-improvement for its own sake Sets 10-to-25-year audacious goals Core values inform all efforts Seeks self-actualization

Reactor Externally driven, without intrinsic passion Pursues competitive strategy Agenda of competence set by the outside world Gets things done to make a lot of money Few once-in-a-lifetime opportunities Seeks growth for growth's sake Ambitious first and foremost for self Focuses on transactions Driven largely by comparison to others Five years is long-term Nothing is sacred; expedience rules Seeks success

Principle of Freedom: You Must Own Property to Have a Right to Vote

Because there are so many who've become freeloaders in our once-free country, it seems the only right way to correct course it to look back to our founding fathers and the original principles that brought about freedom.  

One of those principles which became law was that only those with PROPERTY worth protecting should even have the RIGHT TO VOTE. 

That was the way to insure only those with a "skin in the game" could have any voice in saying how those stakes got allocated. 

When the country was founded, in most states only those with real property (land) or sufficient wealth for taxation were permitted to vote. 

A few exceptions are in order to this rule: 

1. If you've fought in the military for our country, you know what it's like to fight for a cause greater than yourself.  You deserve the right to vote.

2. All voters must first pass a test, call it Freedom 101, and must retake the test every 4 years to ensure they know what the constitution of the U.S. says and what it means.  Dito to elected officials, only their test should be every 2 years and should be much more intense (call it the 500-level test).

Billy says to Dale: "the ship we're on is sinking" to which Dale replies, "who cares, it's not OUR ship."

We've got too many on board a sinking ship who don't care, because, after all it's not their ship: they don't own anything worth protecting or fighting for.  

Will Our Nation Stand this Test?

Ye have heard that it hath been said, Thou shalt love thy neighbor, and hate thine enemy.But I say unto you, Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you, and persecute you,"  -- Matthew 5:43-44

If the inner world of our average citizen in this once-great United States is now divided against his neighbor, and not just divided against, but in hateful, vengeful opposition towards others, hasn't what we feared in the ways of our nation falling already taken root? 


Communism requires us to first of all be divided against each other in class warfare.  Second, it has to create within us some type of justification or rationale or motive for killing each other.  In it's final stages, actual annihilation through genocide in the name of some utopia society brings the seeds of this pent up desire to fruition.

Keep in mind that over 135 million people (an estimated 500 million if you count abortion) have been murdered in the last 100 years.  To give you some perspective, that's more than all the killings from wars of nation vs. nation in the entire history of the world.

These "killings from within" are not from external wars - but from societies whose leaders deemed one class of people inferior to another group.

If a leader of a nation can convince it's citizens to be divided against each other, to hate each other, to threaten to kill or take revenge against another group of people under its "care", then it can easily tip the balance in favor of killing its unruly citizens in a divide-and-conquer-like campaign plague.  


Evil has come more subtly to us these last 50 years, not through abrupt revolution, but through a gradual process of moral apathy and through an evolutionary erosion of conviction.  We've abandoned principles of truth and reason for the zeal of passion and self-justified pleasures.


A recent poll suggests that as many as 33% of U.S. citizens (I don't dare call them "Americans") now favor socialism over capitalism.  The irony here of course, is that our fathers have fought in the Revolutionary war, the Civil War, World War I and II and Vietnam to fight against these types of oppressive ideas.  Ideas that had taken root, and grown into revolutionary proportions that threatened our cherished American way of life - namely the principles of freedom, morality, truth, life and liberty.

Communism has an agenda.  Its constituents are anything but dead.  It has planted itself and taken root in these once 'United' States.  Like weeds who've grown into roots, and roots who've broken the once firm foundation, we are a nation divided.  And a nation divided cannot stand. 


I'm young, but I've followed politics for over 30 years and can still remember watching the debates between Reagan and Mondale as a kid.  I've seen some heated debates and such as I'm sure we all have over the years.

But I must confess, I've never seen a nation so torn, so divided, and yes, even threatening to kill others if their chosen leader isn't elected President.  We have today hundreds of people who've threatened to kill Mr. Romney if he is elected, and many have threatened to kill or injure others supporting him as well.

If all things are created spiritually before they manifest in physical form, then the seeds of our destruction have already been planted, nurtured and brought to the brink of full bloom.

To the credit of those who stand with Romney, I have not as yet heard of one who has threatened to kill anyone.  No, they opt to simply leave the country.  But the question then is, where will they flee to?  If America falls, where can anyone in the world flee to for safety?

My great grandparents fled their native land to escape the threats and persecution of Muslims who attacked them because of their Christian beliefs.  America was a morally strong land.  A land of hope, freedom, and opportunity.  Strong and kind people hoping for a better life gravitated to American because she offered them freedom.

Now it would seem, our society has unraveled from within.  But this is where we will stand.  This is the last place we have to flee to, in spite of all her weaknesses and frailties.  America is still the last best hope on earth.

I hope you will stand with me in remembering what America once meant to those who've given their lives for it.  Let us stand up.  Let us stand firm.  Let us remember and defend the principles our fathers fought for in building and sacrificing for this great nation.

Let us love one another, no matter what.

Tale of the Tape: A Voter's Guide to Selecting Your Next President

Romney can be a dry, and admittedly a sometimes boring servant leader.

Obama is truly charismatic: a true politician getting nothing significant accomplished while pandering to the press.


Romney saved and invested in troubled companies with his own money.

Obama funded, bloated and bankrupted companies using your taxpayer money.


Romney gave over 30% of his income to charity last year, over $1.9Million of his $13.7Million in income was given to charity.  And he's routinely given away over 16% of his money each year for the last several years, to charity.

Obama has given away less than .0001 of his income to charity, $80 on his $400,000 salary.  In fact, Obama has spent over $1 Billion of your taxpayer money for his personal staff, and for family vacations - the most expensive, blood-sucking president in our country's history.


Romney turned deficit situations around with a heading-for-bankruptcy state in Massachusetts, and with the Winter Olympics.

Obama has, in spite of his promise to reduce the deficit by half, has actually doubled it, and continues to spend more than all the presidents in this nation's history, combined.  That includes George W. Bush who liberals like to blame for "getting us in the mess."


Romney as a proven leader consistently takes responsibility for outcomes and results.

Obama blames his failures on Hillary, Bush, the Republicans, etc.



Romney has invested in and operated several successful companies and been a leader in his church in various high-ranking positions (bishop, stake president).

Obama, prior to being elected president of the United States, never ran a business, or led a team, or served in any type of volunteer-leader capacity.

Romney supports family and traditional marriage.

Obama switched from supporting traditional marriage to supporting and endorsing gay marriage, when it became politically expedient.


Romney is pro life, and supports preserving the life and the rights of the innocent, unborn child.

Obama is pro-killing babies if it's convenient for the woman.  He also supports forcing business owners to pay for such procedures for their employees, regardless of one's religious views.


Romney has a long history as a job creator, and he favors pro-growth job policies, having created millions of jobs in the private sector.

Obama is a job killer, having created policies that choke businesses with regulatory red tape.  Obama declared war on business owners when he said, "you didn't create that, someone else made that for you."


Romney has been a faithful Christian throughout his life, even when his faith has become a political handicap, he never denied his Christian faith.

Obama denied and abandoned his faith, not when Reverend Wright said that Americans deserved to die in 9/11 or when he said, "God damn America", but when his association with Mr. Wright became a potential liability during the 2008 elections.   


Romney loves our country and believes we've acted in good faith to make the world a better place.

Obama has come out openly denouncing America and apologizing to other countries for actions in the past, actions that actually freed nations from tyrants and oppression.  (for comparison, under Regan, more than one-billion people were freed from tyrannical or communist rule; whereas Obama's pro-Muslim policies in the middle east have made us weak and an easy target, there is less democracy and freedom in the world today as a result of Obama's foreign policies.)


Romney's policies as governor included compromise, working with an 87% democratic legislature, to make things happen.

Obama blames "the Republicans" for his inability to get the compromises wants from the house and Senate. 

Romney turned Massachusetts around and made it the number-one state for job growth and education, by several measures.

Obama has "poured gasoline on the fire" by spending more on entitlement programs like free food stamps, cash-for-clunkers, internet, free section 8 housing, and free phones for people willing to beg him for it.  This entitlement mentality has crippled our country's independent, once-self sufficient, freedom-loving spirit.


Romney lowered taxes for the average citizen in Massachusetts.

Obama has increased taxes for the average U.S. citizen by over $3000 per person.


Romney's plan is to eliminate the incentives that lead to destructive cycles of poverty and dependency.

Obama's plan is to eliminate the incentives of wealth creation.


Romney has never smoked or drank alcohol or taken illegal drugs in his life.

Obama has a record of taking illegal drugs and still has an addiction to cigarettes.


For me, the choice is clear, simple and so obvious and easy. 

Who will you vote for, and more exactly: why?

6 Characteristics of Successful Entrepreneurs

According to research and numerous studies, there are 6 characteristics
that heavily correlate with successful entrepreneurs:

1. Commitment and determination

2. Leadership

3. Opportunity obsession

4. Tolerance of risk, ambiguity, and uncertainty

5. Creativity, self-reliance and ability to adapt

6. Motivation to excel




Also, are 6 demographic/cultural factors that heavily
correlate with successful entrepreneurs:

1. Being the offspring of self-employed parents

2. Being fired from more than one job

3. Being an immigrant or a child of immigrants

4. Previous employment in a company with more than 100 people

5. Being the oldest child in the family

6. Being a college graduate



On the first list, I believe I've got a high dosage of all 6 attributes.

On the 2nd list, I've been there, done that, except for #3: I'm not an immigrant or a child of immigrants, and to be fair on # 1, my parents have gravitated more towards traditional employment rather than self employment during most of my life, having made several failed attempts. 



Original report written by Tom Byers, Heleen Kist, and Robert I. Sutton, each from Stanford University

Romney a Liar? Try Again.

Who will lead us in the future?  Who is most qualified and capable?  What makes them qualified?  Is it Goodness and  Character?  Wisdom and Intelligence?  Experience?  The ability to unite us as a nation?  What makes one a great leader?

The intellectuals and central planners on the left want the best and the brightest to lead us.  Fine.  Please let me introduce to you one of the most intelligent and capable leaders this country has ever had the privilege of knowing: Mitt Romney.  Romney is a results-guy, not an ivory tower, smooth talking philosopher.  Romney wins on both the intellect and the roll-up-your-sleeves, get-it-done results. 

They say Romney and the Republican party represent a party of corporate greed.  Yet, Romney gives 16% of his massive income to church and charities.  Obama's charitable donations?  Less than .0002% (that's $80 on his $400,000 salary for those of you that are a bit slow on the math).  So Obama fans loose on the 'he's a nice-guy' argument too.

They say Romney's religious beliefs are divisive with the average American.  The irony here is that Obama has all but declared open war on just about everyone he can declare war on: the rich, the capitalists, the business owners, the wallstreet tycoons, the elderly, the unborn, and of course, the Christians.  Further, Obama denounced his hate-inspired religion when it became politically convenient.  Romney is true to his Christ-centered faith, regardless of the political ramifications.

The Obama camp is putting out the PR blitz against Romney and Ryan, on one hand criticizing the two for not getting their facts strait.  Obama accusing Romney of integrity flaws in an effort to tear-down Romney's character is like Brittany Spears telling Celine Dion she's not cut out for singing.
 
Let's look at a few of Obama statements made in the past few years so we can measure up Obama's oratory-flattery and flat-out lies vs. Romney/Ryan's supposed "misleading the facts."

Here is just a sampling of the hundreds of news-worthy-documented lies - what Obama said vs. what he actually did:

• "I’ve done more for Israel’s security than any President ever."  (Are you kidding me?  Obama aided Islamic Extremists take over of Egypt/ Libya)

•  "Rich don't pay their fair share." (the top 1% pay over 36% of the total tax revenues for our country)

• "The Fence between US and Mexico is Practically Complete” (homeland security says less than 5%)

•  "There are No Earmarks in the $787 Billion Stimulus" (there were a TON of earmarks in the stimulus)

•  "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way."  (Um...right - didn't happen, doesn't happen).

•  "My Church Is Like Any Other Christian Church"  (have you read his pastor's famous "God damn America" speech where he blames the U.S.  for 9/11?)

• "I am not somebody who promotes same-sex marriage."  (Well, I guess he changed his mind a few months ago...)

• "Under the White House’s budget proposal, we will not be adding more to the national debt by the middle of the decade. (he hasn't submitted a budget to Congress and he's certainly added significant debts). 

Folks, we don't need another 4 years of hate, division, blame, and smooth-talking lies. 

We need character.  We need strength.  We need a man who is both wise and good.  We need someone capable of turning difficult, unsustainable situations around - situations that call for true initiative and influence and unity. 

We need a leader. 

We need a Mitt Romney.

To Fight or Not to Fight...That is the Question

In a game of chess, white initiates and has the first-move advantage, and black absorbs and defends against white's attack.  If black is successful, he will have created a trap of sorts for white to fall into.  An over-aggressive white play falls right into black's hands if black can build a good defense.

We're in the process of defending ourselves against 2 frivolous lawsuits that have been going on for a year.  The allegations have been desperate.  Our accusers have lied under oath.  The damages they're claiming are completely imaginary and fictitious.  Still, we've had to pay up the nose to have 2 different law firms represent us in defending our case.

I'm not an attorney.  And the outcome of the trial is yet to be determined.  But I must admit that firing my lawyers was probably the best decision I made.  Why?  Because they just don't give a crap.  The irony is, they will charge you a fortune to do a terrible job for the simplest of things.  They say the only ones who actually win in a legal dispute are the lawyers.  I would agree.  So, I figure I've already won half the battle by representing myself.  We shall see if this decision proves fatal.  Ultimately though, nothing related to money is fatal.  If it's a money problem, it's not really a problem.  If we think the problem is ever "out there", then that very thought is the problem.

There's a lot we don't know, but we try to stay humble, learn quickly and apply what we know.  We're always willing to try something new and give it our best shot.  That's what makes us - my wife and me - the entrepreneurs that we are.   

In the endgame in chess, the king comes out to play.  During the opening stages of the game, you castle to try to hide the king from the heat of the battle.  But as the game progresses towards the endgame, and the major pieces are off the table, and the overall strategy has been identified, it becomes safe and sometimes necessary for the king to come out.  Similarly, we've had to take the bull by the horns in doing the legal work ourselves these past few days.  We've had to learn a lot and force ourselves into the discomfort zone.

The reason we will probably win our motions or the ultimate case trial isn't just because the claims our opponents are bringing are completely merit-less.  Their attorney's have made serious mistakes that will end up costing their clients a fortune - about 10x whatever claims they may have hoped to gain against us.

Now I'll have you know a few things about these 2 cases:


1) We've been praying and fasting for these people we're going up against in court, both the principals and their lawyers.  We've been praying that both our hearts and their hearts can be softened and that we might be able to come to a resolution amicably.  We honestly do not wish any harm upon them or their families.  We feel terrible about having to even pursue legal actions.  But our time for defending these claims has expired.  Now it's our turn.

2) We've offered them, repeatedly, concession after concession.  We've lost a lot of money trying to be amicable and to "turn the other cheek". But enough is enough.  We've tried to work out terms for repayments a debtor owes us (yes, he's the debtor, yet he's suing us - go figure).  We've asked for forgiveness of claims that were simply illegitimate.  We've tried to come up with 3rd alternatives.  But, we keep getting stonewalled.


3) We've been the defendant in both of these cases - never counter-suing.  Well, that changed tonight.  We decided, after pleading and begging and praying and trying to talk reason to, well...sue.  We're suing.  We've absorbed their attacks and now, hopefully we can make our claims known to our judge and hopefully she will be persuaded by our facts and the rules of law.

As they say, if the evidence is against you, use the law.  If the law is against you, use the evidence.  And what pray tell, do you do when both the evidence and the law is against you?  You scream like hell and make a fuss.  Well - I don't recommend that last bit of advice, but that's what our opposition has done: a flurry of desperate hell-marry attempts at wild and baseless motions and claims.

Hopefully we can just put this all behind us once and for all.  But if we need to go the distance for another year, we're ready and willing.

Bullies on the playground never really go away.  Eventually, you've got to stand up to them and punch them back.

Quotes Regarding the Federal Reserve Banking System, and How Such an Institution Threatens our Liberties and Freedoms

The Rothschilds

   "The few who understand the system, will either be so interested from it's profits or so dependent on it's favors, that there will be no opposition from that class." — Rothschild Brothers of London, 1863

  "Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild
 

---

Senators and Congressmen

     "Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States" — Sen. Barry Goldwater (Rep. AR)

    "This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill." — Charles A. Lindbergh, Sr. , 1913

    "From now on, depressions will be scientifically created." — Congressman Charles A.
Lindbergh Sr. , 1913

    "The financial system has been turned over to the Federal Reserve Board. That Board as ministers the finance system by authority of  a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money" -- Charles A. Lindbergh Sr., 1923

    "The Federal Reserve bank buys government bonds without one penny..." — Congressman

Wright Patman, Congressional Record, Sept 30, 1941

"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it". — Congressman Louis T. McFadden in 1932 (Rep. Pa)

    "The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers — Congressman Louis T. McFadden (Rep. Pa)

    "Some people think the Federal Reserve Banks are the United States government's institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers" — Congressional Record 12595-12603 — Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932

"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected." — John Danforth (R-Mo)

"These 12 corporations together cover the whole country and monopolize and use for private gain every dollar of the public currency..." — Mr. Crozier of Cincinnati, before Senate  Banking and Currency Committee - 1913

"The [Federal Reserve Act] as it stands seems to me to open the way to a vast inflation of the currency... I do not like to think that any law can be passed that will make it possible to submerge the gold standard in a flood of irredeemable paper currency." — Henry Cabot Lodge Sr., 1913
 

---

From the Federal Reserves Own Admissions

    "When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money." — Putting it simply, Boston Federal Reserve Bank

 "Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries." — Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975

"The Federal Reserve system pays the U.S. Treasury 020.60 per thousand notes --a little over 2 cents each-- without regard to the face value of the note. Federal Reserve Notes, incidentally, are the only type of currency now produced for circulation. They are printed exclusively by the Treasury's Bureau of Engraving and Printing, and the $20.60 per thousand price reflects the Bureau's full cost of production. Federal Reserve Notes are printed in 01, 02, 05, 10, 20, 50, and 100 dollar denominations only; notes of 500, 1000, 5000, and 10,000 denominations were last printed in 1945." —Donald J. Winn, Assistant to the Board of Governors of the Federal Reserve system

"We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon." — Robert H. Hamphill, Atlanta Federal Reserve Bank
 

---

From General Law

   "The entire taxing and monetary systems are hereby placed under the U.C.C. (Uniform
Commercial Code)" — The Federal Tax Lien Act of 1966

"There is a distinction between a 'debt discharged' and a debt 'paid'. When discharged, the debt still exists though divested of it's charter as a legal obligation during the operation of the discharge, something of the original vitality of the debt continues to exist, which may be transferred, even though the transferee takes it subject to it's disability incident to the discharge." —Stanek vs. White, 172 Minn.390, 215 N.W. 784

"The Federal Reserve Banks are not federal instrumentalities..." — Lewis vs. United States
9th Circuit 1992

"The regional Federal Reserve banks are not government agencies. ...but are independent, privately owned and locally controlled corporations." — Lewis vs. United States, 680 F. 2d 1239 9th Circuit 1982

---

Past Presidents, not including the Founding Fathers

   "Whoever controls the volume of money in any country is absolute master of all industry and commerce." — James A. Garfield, President of the United States

"A great industrial nation is controlled by it's system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world--no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men." — President Woodrow Wilson
 

---

Founding Father's Quotes on Banking 

The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs." — Thomas Jefferson, U.S. President.

    "If Congress has the right [it doesn't] to issue paper money [currency], it was given to them to be used by...[the government] and not to be delegated to individuals or corporations" — President Andrew Jackson, Vetoed Bank Bill of 1836 

    "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance." — James Madison

---

Misc. Sources

"Banks lend by creating credit. They create the means of payment out of nothing" — Ralph M. Hawtrey, Secretary of the British Treasury

    "To expose a 15 Trillion dollar rip-off of the American people by the stockholders of the 1000 largest corporations over the last 100 years will be a tall order of business." — Buckminster Fuller

    "Every Congressman, every Senator knows precisely what causes inflation...but can't, [won't] support the drastic reforms to stop it [repeal of the Federal Reserve Act] because it could cost him his job." — Robert A. Heinlein, Expanded Universe

    "It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." — Henry Ford

    "[Every circulating FRN] represents a one dollar debt to the Federal Reserve system." — Money Facts, House Banking and Currency Committee

  "...the increase in the assets of the Federal Reserve banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went directly to the private stockholders of the [federal reserve] banks." — Eustace Mullins

    "As soon as Mr. Roosevelt took office, the Federal Reserve began to buy government securities at the rate of ten million dollars a week for 10 weeks, and created one hundred million dollars in new [checkbook] currency, which alleviated the critical famine of money and credit, and the factories started hiring people again." — Eustace Mullins

    "Should government refrain from regulation (taxation), the worthlessness of the money becomes apparent and the fraud can no longer be concealed." — John Maynard Keynes, "Consequences of Peace."

    "Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits." — SIR JOSIAH STAMP, (President of the Bank of England in the 1920's, the second richest man in Britain):

     "The modern Banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and unmint the modern ledger-entry currency." — MAJOR L .L. B. ANGUS:


  "While boasting of our noble deeds were careful to conceal the ugly fact that by an iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery. — Horace Greeley

     "People who will not turn a shovel full of dirt on the project (Muscle Shoals Dam) nor contribute a pound of material, will collect more money from the United States than will the People who supply all the material and do all the work. This is the terrible thing about interest ...But here is the point: If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way.  It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People. If the currency issued by the People were no good, then the bonds would be no good, either. It is a terrible situation when the Government, to insure the National Wealth, must go in debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold. Interest is the invention of Satan." — THOMAS A. EDISON

    "By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft." — John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).

     "Capital must protect itself in every way...Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principal men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd."-- Taken from the Civil Servants' Year Book, "The Organizer" January 1934.

 

"...I am convinced that the agreement [Bretton Woods] will enthrone a world dictatorship of private finance more complete and terrible than and Hitlerite dream. It offers no solution of world problems, but quite blatantly sets up controls which will reduce the smaller nations to vassal states and make every government the mouthpiece and tool of International Finance.  It will undermine and destroy the democratic institutions of this country - in fact as effectively as ever the Fascist forces could have done - pervert and paganise our Christian ideals; and will undoubtedly present a new menace, endangering world peace. World collaboration of private financial interests can only mean mass unemployment, slavery, misery, degradation and financial destruction. Therefore, as freedom loving Australians we should reject this infamous proposal. -- Labor Minister of Australia, Eddie Ward, during the inception of the World Bank and Bretton Woods, he gave this warning.

Creating Jobs & Security: Codeword for Slavery

It takes a great deal of faith and effort to sustain freedom.

When I hear politicians promising to create jobs for the people, or when I hear citizens demanding that it's every citizen's right to have a secure job, I believe we've lost the true spirit of what it means to be an American.

Security is an illusion born out of fear.  Freedom is a byproduct of those living by faith.

Is our country the land of the secure?  Or is it the land of the free? 

Home of the scared?  Or home of the brave?

The more a nation leans towards favoring security out of fear, the more power and freedom will be extracted from the lives of its citizens.  

You want 100% employment?  Look no further than the ancient Israelite captivity in Egypt.  You want it?  You got it: 100% employment equals slavery.

People who cling to security the most end up in prison.  That's why they call it maximum security.

Speaking of the typical job vs. prison, let's note the contrast. 

I read this years ago, and have always thought it funny and somewhat sad considering our tendency to cling to job security.  Compare the contrast between prison life and the typical job: 

•  In prison you spend the majority of your time in an 8' X 10' cell.
• At work you spend most of your time in a 6' X 8' cubicle.
• In prison you get three meals a day.
• At work you only get a break for one meal and you have to pay for that one.
• In prison you get time off for good behavior.
• At work you get rewarded for good behavior with more work.
• In prison a guard locks and unlocks all the doors for you.
• At work you must carry around a security card and unlock and open all the doors yourself.
• In prison you can watch TV and play games.
• At work you get fired for watching TV and playing games.
• In prison they ball-and-chain you when you go somewhere.
• At work you are just ball-and-chained.
• In prison you get your own toilet.
• At work you have to share.
• In prison they allow your family and friends to visit.
• At work you cannot even speak to your family and friends.
• In prison all expenses are paid by taxpayers, with no work required.
• At work you get to pay all the expenses to go to work and then they deduct taxes from your salary to pay for the prisoners.
• In prison you spend most of your life looking through bars from the inside wanting to get out.
• At work you spend most of your time wanting to get out and inside bars.
• In prison you can join many programs which you can leave at any time.
• At work there are some programs you can never get out of.

"If a nation values anything more than freedom, it will lose its freedom; and the irony of it is that if it is comfort or money that it values more, it will lose that too." - W. Somerset Maugham

The 3rd Alternative: Worth a Shot

In his new book, "The 3rd Alternative", Stephen Covey explains the paradigms and processes necessary for resolving conflict. 

Being involved in a lawsuit at this time, I'll admit being a bit skeptical about the probability of success.  I suppose my skepticism is already part of a flawed paradigm.  So, why even try?

There's a saying that goes, "you can't make a good deal with a bad partner."  I would agree.


Another one of Covey's principles from 7 Habits which I fully believe is that it takes 2 independent people to be in an interdependent relationship.  If you're dealing with a fragmented person, which frankly is what we're dealing with here - how do you create a 3rd alternative solution - a win-win solution - an interdependent solution - with a fragmented and shifty person?

The evidence, the law, the contracts, - everything is in our favor on this case.  We have a right to claim what's due under the demands of just laws and binding contracts.


But, the whole premise behind the 3rd Alternative mindset is that there is in fact a 3rd alternative out there somewhere that's better for both parties, so long as the 2 opposing parties work together to try to create this 3rd Alternative.

And so, I figured it's worth a shot.

I called and left a message to the defendant in the case, basically stating the following script as outlined in the book:

"Hi ________, this is Brig.  Hey I've been thinking about this book I've been reading called The 3rd Alternative, and I wanted to see if you would be interested in sitting down and discussing a possible solution that's better than either one of could have come up with on our own.  The premise behind this book is that there is in fact some 3rd alternative solution out there that's actually better for both of us.  I'm not sure what it will look like, and I frankly don't have any ideas just yet.  But rather than beating our heads against one another, perhaps we can think of something together that would give us what we both want.  I want to see you and the company succeed.  I also feel I've been wronged and that our case is pretty solid in that we're owed what was agreed upon and we're entitled to be paid.  But I'm willing to give this a shot if you're interested in having a discussion.  If you're more comfortable having your attorney present, that's fine too.  If you're interested, you have my number.  I look forward to hopefully connecting with you and talking soon."

I haven't heard anything back, but I'm hopeful we can at least make the attempt.

Should anything come of it, good or bad, I'll be sure to keep you updated.

Top 15 Quotes from Ronald Reagan

Today is Ronald Reagan's birthday.  If he were alive today, he'd be 101.  To remember him and his legacy, I've listed some of my favorite quotes below.

1. All great change in America begins at the dinner table.

2. Concentrated power has always been the enemy of liberty

3. Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.

4. Freedom prospers when religion is vibrant and the rule of law under God is acknowledged

5. Government exists to protect us from each other. Where government has gone beyond its limits is in deciding to protect us from ourselves.

6. Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

7. If we ever forget that we are One Nation Under God, then we will be a nation gone under.

8. If we love our country, we should also love our countrymen.

9. Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.

10. It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first.

11. People do not make wars; governments do.

12. Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15

13. Surround yourself with the best people you can find, delegate authority, and don't interfere as long as the policy you've decided upon is being carried out.

14. There are no easy answers' but there are simple answers. We must have the courage to do what we know is morally right.

15. When you can't make them see the light, make them feel the heat.



In a time when men's hearts are failing them, and the cause of freedom seems but a faint wisper from yesteryears, our hearts long for the time when men like Reagan stood firm, upholding and defending the principles of our founding fathers.

We miss you, Ronald Reagan!

A Simple and Free Time Management Tool

For those of you trying to master the allocation of your most precious resource - your time - or if you're just curious where all your time goes in a given day - check out this free software (yes, you have to actually install it, but trust me - it's worth it) called Rescue Time at rescuetime.com.

It tracks your allocation of time throughout the day, letting you know how much time you've spent on productive tasks vs. those all-too-common, not-so-effective activities.

You can even categorize your activities from a scale of -2 (big distraction)  to 0 (neutral) to +2 (very productive).  For example, today I used windows media player to listen in on some outbound calls that our sales reps made.  The software automatically assumes I'm listening to music, but with the click of a mouse, I can tell it that that was actually productive time spent (in this case on training and development).  It'll remember that selection going forward, and in the future it'll assume I'm being productive when the media player is open.  (If I did use it to listen to music or watch movies, then of course, I'd want to make sure I'm calling it as such and either rank it a -2, -1, or at best a 0 going forward...).

The best part is, you never really even know it's there.  It's pretty quiet in the background, except for the occasional pop-up box asking what you've been doing for the last 10 mins or so if you're on a phone call or if you've stepped out.  

Great tool!  Enjoy!

Have a great weekend!

Ciao!

Do a Deal!

Journal Notes

Discussed our pending lawsuit with our attorney this morning.  Looks like we'll probably be taking back the manufacturing  company we recently sold.

Tip to those of you buying a business who owe on a note: always, always pay your note on time.  You may have disagreements with the seller, but you still need to make the payments - otherwise, you'll loose the company you've spent so much resources and time buying and building.

If the seller has agreed to finance a portion of the business in the form of a secured note, then the seller has a secured interest in the business and its assets.  Keep that in mind.  The seller has a right to enforce the terms of the note - a no-brainier.  If you don't pay, you can - likely will - loose the company.  Or, the note holder can call the entire balance of the note due, plus legal fees, accrued interest and penalties, and other collection costs associated with the note.

I believe I'm pretty reasonable - but these guys haven't made a single payment and they haven't tried to reconcile the balance due.  We've even offered to take a slight discount and waive the legal fees and accrued interest due.  We've also offered to simply take back the collateral (the business) in exchange for debt forgiveness.  No go.  Apparently they want to fight it out.

Bring it on.


On another note, spoke briefly with our CPA today - hoping to get some advise on structuring our companies differently going forward.  We'll meet with early next week.

Had lunch with an attorney I've met a couple of times - great guy.  He typically represents banks trying to seize assets from debtors.  (He joked that I should have hired him to go after the game-player-buyers who've decided to do a no-pay on us).  Found out we're both LDS and served missions during the same time (96-98), and that he served in or near the same mission as one of my best friends, Ben Davis.  Small world.


Found out several positive developments have recently come into play for the owner of the companies we were looking to buy out and turnaround:

She's not too sure she wants to sell to us at this time.  Wants another two weeks to think our offer over.  After she meets with a possible joint-venture partner/investor she'll make up her mind.  Told her I think she's perfectly capable of turning around the company herself, if her heart is really in it.  I think it is.  I wish her the best of luck and have opened up our services to her anytime she may need us in the future.

Talked with one of my business partners who's an investment banker about the deal as he's been with me on this one from almost the beginning.  We still need a lot more information before we can do any forecasting or financial modeling at this point.

Spoke with several business note buyers and brokers today - let them know our group is interested in being included as a possible buyer for business, real estate, and even non-performing notes that they may have.  A few good leads.

All for now - ciao!

Do a Deal!

Journal Update 1-27-12

Today I met with a business owner for the second time in 2 months.  Though we've had several talks since our first meeting, nothing has come of our discussions except some rough draft ideas on how we might structure a deal.  We've discussed the possibility of buying out one or more of her company divisions.

With the debt against the company preventing her from filling new orders - a very large order just recently came in - I'm convinced a financial buyer like our group would be the best option for her.  We'd buy out all 5 companies, maintaining the culture and synergies she's built over the last 30+ years.

To date, she hasn't been successful in bringing any strategic buyers to the table to buy the individual companies.

Today's meeting I felt went exceptionally well as we met with her CPA/CFO and the CRO working with her on the restructuring.

Though not in bankruptcy, the company needs new capital to stay in business.  Unfortunately, most of the 20-plus talent-team has left or been laid off the past few years and the company is down to a headcount of 4.

My offer, informal as it was, was that we keep the letter of intent (LOI) open without nailing anyone's feet to the floor.

"You want to walk away from the deal after we've mapped out the framework of the LOI, that's fine by me."

"What about due diligence?"

"We'll tackle due diligence once we have a signed purchase agreement and we'll want breakup fees at that point should you decide to shop or walk on us.  But until we've defined, first whether we want to be doing business together, and second, how we want the business transaction to play out, there's no point splitting hairs in determining and defining the value of the company, or holding each other to anything binding just yet." 

So, I've left the ball in her court on this one.  I've already outlined 4 possible scenarios for how we might purchase the companies: straight cash offer for the assets, a  couple of earn-out plans, and a buyback option plan for her if she wants to eventually regain control of the businesses, etc.  My advise to her was to pick a plan, list her key measures / criteria for a successfully culminated deal, and then we can flesh it out after defining it more clearly in an LOI and eventually a purchase agreement.

Also met today with a good friend of mine who's a professor at one of the local Universities.  He teaches courses related to strategy, private equity, and M&A (mergers and acquisitions) - we've been talking more and more about forming a company together - a private equity & consulting group.  I think it could be a great marriage.  He has a lot more experience with mid-market deals and he knows a lot of people in high places.  I have the utmost respect for him and am optimistic about the prospects of working alongside a seasoned veteran. 

Talked to my attorney earlier.  Looks like our opponent's counsel is a complete idiot, which is always a bonus.  I believe I have the best attorney in my corner and have complete confidence in his and his partner's abilities.  I never actually thought I'd enjoy working with an attorney in a lawsuit situation, but I'm truly blessed to have Mark & Scott on my team.

New sales associate I hired this week has hit the ground running with very little, more like no training or input from me.  Already talked with two business owners looking to sell their companies in industries we're targeting heavily, so I'll be talking with them hopefully on Monday or Tuesday to find out more and to see if there's anything our company can do to help.  

On that note, I'll recommend a book I'm still reading but that has been a real eye opener here on the hiring process.  It's called "Who?" by Geoff Smart and Randy Street.  Check it out if you've ever made a bad hire (I've made plenty, but I've repented of my sins here and I think I'm getting better.)

Registered online with 2 sites: secondmarket.com and caplinked.com.  Too soon to tell if the sites are worth spending much time on, but they look awesome so far.  Perfect platform for dealmakers and private equity groups.  The concept is there and it looks like there's a few players too - we'll see if anything comes of it.

Do a Deal!

Ciao,

Brig

4 Major Trends Affecting the M&A and Distressed Business Markets in 2012

I believe 2012 will be a very good year.

It's the year of the dragon after all.  My kind of year.

Four trends  main reasons why I believe 2012 well prove a great year for M&A advisers and distressed business buyers like myself.

1) New Trend: According to Frank Mack, of Saybrook Capital, LLC, Private Equity Groups, (PEG's) entering 2012 have a lot of cash to deploy.  Estimates of funds committed but not yet deployed are about $477Billion.  Most of the over hang is held by mega-buyout funds (over $5 Billion) and this amount is unsustainable - that is, its way too large to be absorbed under the current M&A conditions.  In addition to the trends of too-much-money from the big PEG's in the market, we're seeing smaller PEG's with under $500MM emerging in greater number. 

2) Ongoing Trend: Lenders and debtors continue to kick the can down the road (amending extending, and pretending), restructuring debt outside of Chapter 11.  This of course allows stakeholders a better chance of maintaining control.  Whereas bankruptcy under a Chapter 11 filing used to have a higher probability of turning into an actual restructuring of the debt - the original intent of a Chapter 11 - for the past decade-plus, companies have had a harder time maintaining control of the outcome for a variety of reasons.

3) Short-term Trend: Bush-era tax cuts on capital gains are expiring.  Those looking to sell their businesses in the next 2-3 years, might be better off selling in 2012 rather than waiting.

4) Long-term Trend: Baby-boomers are retiring en-mass over the next 10-15  years, and many of these are business owners looking to exit before the market becomes too saturated with an over-supply of businesses.

Almost one month into the  new year, and for me, 2012 is proving to be a good year already.






 

Journal Updates

Hired a new sales associate today after a couple months of interviewing. 

Submitted a letter of intent to GE Capital and Wells Fargo to buy out their respective $5.7MM and $6.7MM equipment-based loans for a discount.

Under the new terms, the loans would be restructured into 5-year loans at 6-8%, and we'd be getting a 50%+ discount on the face value of the notes.  Best part: we'd be fully secured in the event we had to liquidate the equipment and obtained less than salvage values. 


We're of course trying to help turnaround a distressed industrial processes business whose loans are coming due in the next few months, whose current operations can no longer support the debt.

The consultant I'm working with has a history of navigating the maze with distressed companies and has succeeded in 100% of his cases to avoid filing for bankruptcy.  I told him that was pretty impressive, but unless the lenders are willing to take a serious haircut or restructuring of the debt here, they're going to have to file Chapter 11.

Sometimes you have to be the "3rd Alternative" for a 3rd Alternative solution to play out between 2 opposing parties.

Our proposal is contingent upon the debtor agreeing to enter into a new loan and turnaround program with us.

We'll see if they go for it.

Romney, Mormons & the Effeciency Mind-Set that Makes Business Successful

As a country, we've grown dependent and weak.  We've lost hope, many of us.  We've been divided against each other.

Such sentiments favor any political system seeking to extort or control a people.


While this blog isn't about religion or politics, and I hope to stay clear of these sensitive topics here, I just have to say something about the ridiculous nature of the attacks against Mitt Romney.

(First for some disclosures: yes, I'm a Mormon.  No, I'm not voting for him...so long as Ron Paul is still in the GOP race.)

The Mormon heritage of our pioneer ancestors has taught us something of industry, frugality, and the importance of character.  Without these core attributes, the Mormon faith along with its early pioneer followers would have gone into extinction in the tough and unforgiving environments of Salt Lake City.

Being driven from state to state prior to settling in the SL Valley taught them something of resilience, tenacity, faith, and being united as a people.

Frankly, I can't think of a better mix of antidotes & note-worthy attributes we as Americans could use injected into our culture at this time in our history.   

To the extent we rely upon a central-figure leader in our government - and I don't believe the founding fathers of our country every intended such a concentrated reliance upon the federal government as we have today - we need all the more men or women who are both wise and good at that all-too-critical head of government.

When I see Romney being attacked in the media for being efficient with the use of capital, I have to laugh.  This argument is right up there with the self-proclaimed 99-percenters (who in all actuality account for less than one percent of the true American sentiment - though that too is hard to measure, because the 99%'ers don't really stand for anything per say, at least not in a unified way.)  Enough on that for now.

Brigham Young, the President of the LDS church following the martyrdom of our founder, Joseph Smith, taught the following:

"If a man is worth millions of bushels of wheat and corn, he is not wealthy enough to ... sweep a single kernel into the fire.  Let it be eaten by something...Remember it, do not waste anything, but take care of everything."

So, my point here is that the Mormon faith and the legacy of its members are rich in the heritage of holding to such noble virtues as:

• Self-Sufficiency
• Work-Ethic & Industry
• Sacrifice
• Frugality
• Giving to the Poor
• Gratitude
• Honoring Contracts & Commitments

The more the media and his opponents attack Romney for being wise in the allocation and disposition of his resources, or giving to the church of his faith or to any other charity, the more their arguments sound like the desperate cries of petty, spoiled children.    



The better one manages the affairs of his own household and his own financial resources, the better still he'll be in the office as overseeing any organization that depends upon goodness, wisdom, prudence, frugality and self-discipline (couple hints: 1) we need someone like that in the oval office, and 2) every team or organization could benefit by having someone like that leading it.)


I had a conversation with a friend of mine the other day where he said, sarcastically and in reference to an offer I had made to buy out his client's company "what is it with you Mormons anyway?  You're just like Romney, looking to squeeze the best deal out of people - what's up with that?"  We had a good laugh together, and then I agreed with him that I wasn't looking to be a charity in my deal making here.  The CEO of this particular company has used the company to fund a very expensive lifestyle - and the company her grandfather founded has now been run into the ground.  Where it once had 20-30 employees, it's now down to 4.  It needs a turnaround, and fast.  There's risk with taking on that type of a project and making any type of investment of time or money.

My point on this tangent is that we need leaders who know how to sacrifice for, rather than milk and extract from, the organizations they lead.   

Crazy Stories from Bankruptcy Trustees

Attended a TMA social last night.


A few crazy stories from trustees taking over some very difficult bankruptcy situations.  Some of the funnier stories/highlights --

• A trustee appointed to take over an alligator farm in Louisiana.  Unable to pay for meat to keep the gators alive, so the judge allows chickens from a separate case to be used as the gator fodder.  (Needless to say, the judge wasn't a judge for very long thereafter).

• The U.S. government takes over of a brothel (prostitution ring) after attempting to force a drug dealer into submissive compliance and confession - they get him on some measly payroll taxes and force the estate into bankruptcy.  The government, unaware at first of the nature of the businesses they've acquired, continue after finding out for a series of months to run the brothel after realizing just how lucrative the business really is.

• Trustee shows up by court appointment to take over a divorced man's estate.  On the way from the airport, the trustee and the man stop in at the man's psychiatrist and the doctor tells the trustee "he probably won't kill you, but he might try to take you out on his way out."  Apparently the man is high-risk suicide.  Man's dog bites a chunk of flesh out of Trustee's shoulder, requiring them to then go to the hospital to get stitches.  Trustee calls in and asks the appointing attorney for claims/damages, only to find out that he would be in essence suing himself as he's now the appointed trustee of the estate.  Poor guy only made about $7K on the mess as the trustee.

• Another trustee takes over a bankrupt, for-profit hospital only to have the board of directors hand him the keys to the building and basically say "good luck, we're' outa here."  He begins asking around and the rumors start to ignite a mass exodus of doctors and nurses from the hospital - some taking equipment and drugs with them on the way out.  He gets police officers over to bar the doors and he changes the locks.  Asks family members to come get the patients and transfer them to a new hospital - after all, there's no doctors left, and he's down to 3 nurses.  Heaven forbid something go wrong with one of the patients on his watch.  Luckily able to get all the patients transferred to another hospital across town after calling 911.

Problems Equal Opportunities

This past week I looked at a manufacturing company for sale here in Arizona.  It has strong, consistent sales, good margins and cashflow.  It has employees that have been with the company for many years, with low turnover.  It's being offered at a fair and decent price.  It has strong market penetration and is the only player in this niche in town.

Yet, I chose not to put an offer on it.

Why?

After touring the facility and seeing the operation, I'm convinced there isn't a whole lot more I can do with this one to improve it.  Sales would likely remain flat, in spite of any marketing or sales efforts on my part.  There aren't any new technologies that could be introduced here to make things significantly more efficient from a costs/operations standpoint.  They've got a good team of people in place and they're paid fairly. 

Most of the businesses I check out have a lot of problems.  For me, problems equal opportunities.  And the bigger the problem, the bigger the opportunity.

My advice when buying a business:

Don't get stuck trying to preserve the status quo. 

Focus instead on creating new value.

Network

Attended the Arizona Business Brokerage Association (AZBBA) as a welcomed guest of Michael Abbinante this morning.  He's sold more businesses in Arizona the past few years than anyone - he tells it how it is and is one of the better brokers I've worked with.  Amazing how many people I've come to know over the years.  I probably have done business with more than half the members there, many of whom I'd never actually met face to face until today.  Great group of people.  For those looking to buy a company, attending one of these meetings as a guest might not be a bad idea...

Met with a friend for lunch who I know through Toastmasters.  With his background in M&A, consulting, and capital raising, I'm intrigued that he wants me to partner up with him in creating a new private equity / venture capital / incubator - consulting firm on a partnership basis.  He's invested a lot of time and money into the project already.  I've always respected and admired him and would welcome the opportunity to work along side him.  Still in brainstorming for now, but certainly intriguing.

Met with our Realtor this afternoon to discuss selling some of our properties.  Joan Kilby is not only a great friend, she's probably the most experienced, passionate, well-educated and loyal real estate agent I know.  We're pretty much upside down on all our real estate at this point, and our holding costs compared to the inevitable hit to our credit, should we choose to short-sale the properties seems to be a no-brainer.  On the other hand, I'm a big believer in sticking to the contract we signed - our word is our bond - and I detest the idea of not living up to what I agreed to on the loan.  After a lengthy discussion and getting caught up on life, Joan talked us out of listing the properties since we intend on purchasing more real estate this year. 

Brae is calling me to dinner.

2 Tips for Structuring the Deal in an LBO

Two of the most common questions I get from potential buyers looking to buy their first business is:

1) What should I offer?

2) How should I structure the deal?

There are several books that will give you multiples and, while useful as a guide, the structure of the deal depends upon a few things. A couple of books I've read and found authoritative and helpful in the valuation process:

Tom West's "Business Reference Guide"

Stephen Bethel's "Business Valuation Rules of Thumb & Formula Resource Guide"

However, as useful as the reference guides listed above are, they don't dive into how best to structure the deal.  Most of the businesses I buy I try to structure with an LBO (leveraged buyout) mindset, which really is the best approach when trying to protect your downside.  This approach won't work well for service-based businesses or businesses with few or difficult-to-quantify assets.

Here's a general guide for buying a business and you want to protect your downside (hint: you should always protect your downside).
 
1) Look to the balance sheet for your downpayment.  

Additionally, be prepared to discount the assets to create a floor.  Anything below this number, the seller is better off simply liquidating himself.  In most small-business situations, you don't want to put down more than the assets of the business are worth at face value.

For example, a small manufacturing business I helped someone evaluate today has $650K in equipment and about $100K in inventory in the asset column.  Not sure how they figured its worth at $650K, but let's assume I can buy most of the major equipment units off ebay or through a liquidator for $350K.  The $350K would be my floor.  Assuming I could buy the equipment new for $500K, the $500K would be my ceiling.  So my downpayment is going to be between $350-$500K.  We'll say $400K as an example.

2) Look at the income statement for the debt service.

The company we looked at today is doing $1.2M in sales and is throwing off a steady $200K per year in positive cashflow.  $200K is the most it can afford to pay in debt service.  Of course, the business will also be required to support a new owner-manager's salary - say $40K/year for the first year.  And we have a minimum ROI on our capital invested, of say 25%, or $100K per year.  That leaves us with a cap of $60K per year in 'leftover' cashflow available for servicing debt.

We could offer the Seller a note for $300K at 6% for 6 years and that would bring our annual debt service to about $60K/year.


Total offer price: $400K down + $300K note = $700K.


Their asking price?


$850K.


So there's a gap there.


Either the Seller will bend and accept the offer as it's going out, or the Buyer will need to come up a bit more on an earnout basis.


In any event, the point here is that you need to know what a business can realistically support from an income/debt standpoint, and what the business is worth from a balance-sheet/downpayment standpoint.

2012 Resolution: Educate People on How to Successfully Buy, Fix and Sell a Business

For too long now I've used this blog as a place to store random thoughts and ideas. I've used it to share a bit of my philosophies on life. Enjoyable as this may be for me, it's not much use for anyone who might be looking to do what I do. That is, buying, fixing and selling companies. Because I've received more inquiries the last several months from people wanting me to evaluate specific business opportunities they're considering, I believe this would be a great platform for addressing questions and specific deals. I promise to maintain propriety. I can certainly appreciate the need to keep specifics of a deal confidential. However, unless otherwise requested, I will be sharing enough information on the deal to help others, while of course, eliminating confidential specifics such as the location of the target. My hope is that we can learn together. If there's a business you're considering purchasing, or you're in a distressed situation, or you're just trying to sell your company, feel free to email me with your questions and I'll do my best to get back in touch with you within 48 hours. No promises though, okay?