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| LEVERAGED CAPITAL NEWSLETTER Leveraged Capital, is a free monthly newsletter that presents growth and strategy issues effecting entrepreneurs and owners of small to medium size enterprises (SME's). Leveraged Capital is published and delivered electronically to subscribers. Your privacy is strictly respected and we do not share or sell subscriber email addresses to anyone outside of Graham Financial Corporation. If you enjoy what we present, please forward a copy of Leveraged Capital to clients and associates. They can subscribe to Leveraged Capital, by clicking on this link: http://www.GrahamFinancial.com/newsLetter.htm and filling out the quick form.
The Wall Street Journal reported earlier this month that an expected total of $10.7 billion in bonuses will be paid for 2003. That's almost a 25% increase from 2002, though still much less than the $19.5 billion of windfalls paid in 2000. With that in mind, hats off to Gerry Schwartz, Chairman and CEO of the Toronto based multi-billion dollar Onex Corporation (TSX: OCX). Onex’s compensation committee authorized a 2003 bonus of $8 million for Schwartz, which he turned down because of the company’s poor stock performance. This is the second year in a row that Schwartz declined his bonus and the third year in a row that he has not taken a pay increase to his $650k salary. More than a few companies come to mind that could use Schwartz’s pragmatic approach to shareholder accountability. Much (long-term) success to you,
In This Months Issue: (Click on the Article Title To Go To The Full Story.)
Quote Of The Month: Investment Hindsight:
The day after Thanksgiving, before leaving for Korea in 2000, my husband, Tony, handed me two folders, one containing the records for our tax accountant and the other information about our company, Electronic Business Solutions, Inc., which we had co-founded a decade earlier. Tony was headed to Korea to seek alternate treatment for the cancer that had been diagnosed in 1989, just before he launched the sole proprietorship that would eventually become our company. He would die in Korea in December. Handing me the folders, he advised me to get out of the business should he not ever come back. "Don't even bother saving the company," he said. "Stay home. We're financially independent, and you can be with the children." This was his last wish for me. That fall, it was true that Electronic Business Solutions was faltering. Our only partner, Sun Microsystems, was about to drop their partner programs of which we were an integrator of its products. Nor would there be, with Tony gone, the top-level vision necessary for refocusing. What's more, it was true that I could afford not to work, and even more to the point, that I would be needed at home. We had three children, all under the age of eight, and they would soon be without a father. A Different Decision. Those compelling reasons notwithstanding, I instead made a different decision, in January 2001, just after my husband had passed away. In many respects, it mirrors the way we had lived our lives in our years together. However, it also laid the groundwork for the future that I envisioned as a young widow and single parent. In short, I decided to continue with Electronic Business Solutions, assuming the leadership of the company with the objective of rebuilding it. What's more, I did so not because I needed to earn a livelihood or because I wanted to make ever greater profits, but because I had decided to commit to a larger goal. In January of that year, I had received a small sum of money from friends and family, and I couldn't bear just to spend it. It was too precious. However, I knew that I would be able to spend it on an endeavor related to Tony. So I found myself thinking back to a goal I had set when I was happy, and I said to myself, "That's it!" Re-building our business will enable me to secure the capital necessary to establish a memorial to my late husband. My goal was to establish housing in Boston for cancer victims who must come to the area's hospital for an innovative treatment, namely proton therapy, currently offered at only two medical centers in the United States. The therapy had helped Tony, and I wanted others to be able to take advantage of this same treatment. In sum, I would be building a business this time around for a higher calling. My business model would entail "working hard to help others." And that, I have found, has made all the difference. A Happier Time. Before I describe how and why, let me first explain that my decision might have been different from what Tony had advised at the end of his life, but that it was very much in synch with the way we lived during happier times. Back in 1989, it wasn't until Tony was first diagnosed with cancer - of the nasal system - that he decided to go ahead with an idea for a business of his own. A design engineer by training, he had recognized an opportunity to sell computer parts, and if not then, when? We were both in our 20s - he was 29 - and newly married. I remember him making sales calls between treatments at Massachusetts General Hospital, using its public phone. In the same vein, we decided shortly after receiving the diagnosis to start a family, and we had three children in the years between 1993 and 1997. In the meantime I suggested building our dream home and we did build our house in Boston suburb. For if you stop living just because you're told you're going to die, that's when you do, in fact, begin to die. In 1993, we incorporated our sole proprietorship as Electronic Business Solutions, Inc., bought a headquarters building, and began setting business goals - for two, three, five years out. We were even thinking about an IPO. Most significantly, by 1997, besides having three beautiful children, a dream home, and a growing company, it was clear that Tony' cancer hadn't recurred, largely because of the proton therapy he had been receiving at MGH. I remember driving him back and forth from our home in the suburbs, thinking how much harder this would be for patients who had to come from a distance - living in tiny apartments, being physically as well as emotionally away from home. And it was then that I first thought about giving back, doing something "when we sell the company." At that time, that goal was going to be my after-retirement project. A Higher Calling. In the years since Tony's death, I've approached the running of our company - and, indeed, entrepreneurship itself - to accomplish what I first set out to do in those happier times. While rebuilding Electronic Business Solutions hasn't been easy, I've recovered from the mistakes I've made and I've brought a heightened business savvy to the absolute necessity of having to get the job done - in order to achieve a goal more substantive than profit. In the spring of 2001, for example, I hired a chief operating officer who, I had thought, would bring the necessary leadership and deliver on certain sales objectives, only to be taking aback when none of that happened. Instead, early in 2002, that COO said he intended to buy the company and wanted me out. He delivered an ultimatum: sell or I'm leaving with entire management team. He ended up resigning shortly after learning that I would not hand over my company. His reason for his resignation was for our inability to be a Sun Microsystems partner. He said, "SUN will never reinstate your partnership, and without it I can't deliver what I promised you." The lesson I learned was that to build the company I desperately needed for the sake of my larger goal, I would have to do it myself. Likewise, for most of 2002, I took over the critical imperative of convincing that major partner, Sun Microsystems, to allow our company to continue to resell Sun products. Our relationship with Sun was key to our survival, and yet Sun was terminating its programs with resellers. Rather than just accept Sun's tactics, I knew that I could prevail. I had the determination to win back the contract - because I was striving for a goal that was more important than profit. I also knew that I couldn't approach Sun on bended knee begging for our survival. Rather, I did my homework, studying Sun's plans for the year ahead to uncover a niche in which our company would enable Sun to increase market share without a costly investment. After six months of battle, I prevailed, signing in October as one of Sun's eight OTP (OEM Technology Provider) partners in the country, and the only one located in the East. No one, and I mean no one, thought that would happen. We secured two programs under the new contract, and we are looking forward to a bright future. A Plan for the Future. My goal for Electronic Business Solutions and its 20 employees is to increase revenue back over $20 million next year, from the $10 million in 2001. Also, I want the company to turn the corner to profitability. However, it is the larger goal upon which I am focused for the long term. It has been because of that goal that I was able to revitalize my company. Indeed, focusing on that goal has been the difference between my believing that I could only go so far and that I could go SO FAR! For the next few years, I expect to be running Electronic Business Solutions. Thereafter, I hope to take the leap to attending full time to my larger goal of establishing the memorial to Tony; already, I have been in touch with MGH about possible plans for the housing for cancer patients. The irony has been that my focusing on this higher calling has enabled me to become a more effective entrepreneur. If my goal was to make money for my family, or myself, I couldn't have accomplished what I have now. I already had that. It was the challenge of the higher cause for others that pushed me further. I have asked myself many times why Tony had to die. I was angry and mad, but as a positive person, I found the answer. Tony's death will be justified only if I could help many other lives. It has been a good grieving!
"Why should I care about ISO standards if my entrepreneurial company isn't a manufacturer?" This is a great question and illustrates the common belief that ISO is only for manufacturers, or huge conglomerates, or global enterprises. As an entrepreneur who founded several companies (Leo) and a quality-management specialist (Ralph), we have experienced how ISO standards have helped our various companies and benefited our clients. Reasons to Use ISO Standards.
About ISO. ISO derives from the Greek root, "iso," meaning equal. In 1947, when groups that set quality standards in individual countries first got together and proposed formulating standards that would be recognized globally, they targeted major manufacturers. Today, however, the International Organization for Standardization, a non-governmental group with 140 member bodies from as many countries, targets all businesses. De-Mystifying ISO. Some entrepreneurs believe that ISO standards would force their products or services into a preset mold that isn't practical, natural, or achievable. However, nothing could be further from the truth. ISO standards aren't rigid dicta, but rather guidelines into which each business inserts its particulars. An analogy would be a road map, say, from Ralph's home in Holland, Michigan, to Florida. The road map would direct the traveler to take I-75, the quickest and most efficient route. In this case, Ralph would need to amend the road map to include the state highway connecting Holland to the interstate. If he were traveling for pleasure, he might further tinker with the document to include forays on scenic highways paralleling I-75. ISO standards are analogous to the road map; how the road map is applied is up to the individual company. Consider the case of an entrepreneurial enterprise that provides valet parking services at airports. ISO standards stipulate that companies have a written job description for each position. However, this company, whose valets meet customers at the curb and take the cars to be parked (as well as provide services, such as oil and filter changes, while customers are traveling), would tailor its job description for the valet according to its requirements. In this case, the valet company sought ISO certification to secure bank financing. In another, a three-person design firm wanted to get a grip on the business side of its endeavor. One ISO standard calls for polling customers for feedback on invoices. In doing so, the design company found that its clients wanted a more detailed description of the time spent on each task, as well as a listing of the charges for materials. When the firm complied, it discovered that it got paid faster and with less hassles, and was attracting more repeat business. Steps to Standardization. Achieving compliance with ISO standards isn't easy or inexpensive. The first step is becoming familiar with the lingo. The most important buzzword is ISO 9000, the benchmark that has for years applied to most companies. In November 2000, it was updated and renamed ISO 9001:2000 to align more effectively with the needs of process and service companies, and with another guideline that governs environmental issues. Next, entrepreneurs need to make time for the process, which usually takes 18 months. Sometimes companies hire a third party, such as our consulting firm, but that route is expensive. A company would spend $10,000 or more depending upon its size and complexity. In either case, whoever is designated to lead the initiative must follow a proscribed set of 13 steps outlined by the Organization for Standardization. These include identifying the goals the company wants to achieve, such as improving profitability or market share; obtaining information about the ISO standard for each; determining whether the company meets the standard, and, if not, how to bring it into compliance. (A full list of the guidelines appears on the ISO Web site). To Certify or Not to Certify. Once in compliance, a company must then determine whether or not to go for certification, which means being approved by an independent accredited registration or certification entity, apart from the International Organization for Standardization (which doesn't handle the job of certifying.) Many foreign countries require businesses to be certified. In the United States, however, this step is optional, and companies could instead simply align their processes and procedures to ISO standards and declare themselves in compliance. In our opinion, even companies in the United States should pursue certification. Taking that step, after all, would make the best use of the resources it has expended to undergo the process. In addition, certification signals forthrightly that the company cares about adhering to a level of quality that is unsurpassed in the world. In sum, the rewards of being in sync with an internationally recognized quality standard is more than worth the exacting journey to get to that point. A benchmark against which a company can measure progress, a credential on the calling card: these are reasons enough for founders to pursue the ISO compliance and certification. The case is airtight -- ISO amounts to an entrepreneurial statement. Leo T. Glynn and Ralph S. Stowe founded Pro-Quality Management Services, Inc., which consults to companies seeking to comply with ISO standards and obtain certification, in 1995. They currently serve, respectively, as president and chief executive officer.
CapitalStream, a leader in front office automation and risk management solutions for commercial banks and finance companies, today announced details of its ongoing research program for the commercial finance industry including the latest research report focusing on small business lending and the launch of a new research survey focused on mid market lending. Designed to provide insight into competitive challenges and technology issues facing commercial lenders, CapitalStream's research program is based on surveys of industry executives and delivers a strategic look at the overall commercial finance industry as well as in depth research into specific market segments such as mid-market lending, small business lending, equipment finance and commercial real estate. "CapitalStream is committed to sponsoring industry research that not only helps us develop the most powerful and relevant solutions for our customers -- but also provides executives with a roadmap to improved effectiveness, productivity and responsiveness," said Kevin Riegelsberger, president and CEO of CapitalStream. "We're examining the multiple facets of the commercial finance market individually, working to identify each segment's challenges and opportunities to provide an in-depth, relevant and comprehensive view of the trends across the industry." Based on interviews with more than 100 banking executives, CapitalStream's latest research report reviews the systems and processes used by leading small business lending organizations, identifies the top challenges facing the industry and the best practices used to address these challenges. Fair Isaac Corporation, the leader in customer analytics and decision technology, co-sponsored the Small Business Lending Survey Report which presents a detailed look at how banks are managing their small business relationships and improving operational effectiveness to grow their credit portfolios. The American Bankers Association (ABA) and CapitalStream are currently co-sponsoring the Mid Market Lending Survey which is investigating the challenges and best practices used by leading banks to source and manage commercial relationships with mid size businesses. The ABA and CapitalStream are actively seeking senior- or mid-level executives in mid market lending or commercial risk management to participate in the survey. The latest small business lending and mid market lending research surveys continue to expand on CapitalStream's prior research surveys covering the overall commercial finance and equipment finance markets. "CapitalStream's industry research provides valuable information to help understand the trends in the industry and the types of systems and processes being used to better serve our customers," said Peter Berbee, senior vice president, Small Business e-Commerce Marketing, Bank of America. "The latest report on small business lending highlights the need to apply more automated approaches and reinforces Bank of America's investment in technology to respond quickly and efficiently to our small business customers, offer the right products to the right customers and support growth without increasing overhead." The top challenges uncovered by the Small Business Lending Survey Report reflect an ongoing need to drive business growth through more efficient, consistent and integrated front office operations. The best practices being implemented by industry leaders focus on improving the speed and efficiency of the origination process; maximizing the value of each relationship; integrating information for straight-through processing; and automating to ensure rapid and consistent credit decisioning. The survey offers a detailed and fact-filled analysis of issues facing the industry. For example, the survey uncovers significant disparity in the level of success achieved by different organizations in responding to customers. Credit approvals for micro transactions (less than $100,000) range from instantaneous to more than two weeks, and documentation delivery times range from instantaneous to almost three weeks. The survey also uncovers that even though 82 percent of small business credit applications are systematically scored, the final credit review and decision requires a manual review more than 85 percent of the time. Certain banks can approve credit and deliver documents instantly -- before the customer leaves the branch or the Web site -- and they are in a better competitive position and poised to gain market share. Research was conducted from April to August 2003. Send an email to survey@capitalstream.com to request the final Small Business Lending Survey Report. Executives interested in participating in the mid-market lending survey currently in progress can also send an email to survey@capitalstream.com or call 866-779-4733 and ask for a Market Research Specialist. Contact: CapitalStream, Sandra Sick by email at sandras@capitalstrea.com or by telephone at (206) 548-1703. CapitalStream provides software and consulting services that enable commercial banks and finance companies to collaborate, integrate and operate more effectively across their front office operations. CapitalStream solutions streamline data gathering, deal structuring, credit analysis, document generation, booking, account monitoring and ongoing risk management to more effectively originate transactions and manage commercial relationships. CapitalStream transforms the paper-based operations of mid market, small business, equipment leasing and commercial real estate groups by reducing costs, risk and processing times to grow their portfolios without increasing headcount. For more information, visit CapitalStream's Web site at www.capitalstream.com.
As if spam has not caused enough grief and disruption, if you are an unsecured instant message user, now you have to worry about SPIM, which is spam’s unruly cousin in the form of unsolicited instant messages. According to the Radicati Group in Palo Alto, spam accounts for 45% of all e-mails, or 15 billion messages every day and costs businesses world-wide a total of $20 billion a year in lost productivity and technology expenses.. Radicati predicts the number of daily spams will rise to more than 50 billion by 2007, and costs will reach almost $200 billion a year. Ferris Research in San Francisco reports that SPIM, has increased in 4 times from 2002 to 2003 – 125 million spim messages in 2002 to 500 million by 2003. Ferris estimates that in 2004 some 2 million spims will be floated in 2004.
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