Where the Freelance Economy Is Booming By Patrick Clark

0531-freelancer-630x420[1]There were 22.5 million U.S. businesses that didn’t have any paid employees in 2011, 1.7 percent more than in the year before, about 75 percent of total businesses. They reported $990 billion in total revenue, up 4.1 percent from 2010. About 18 million non-employer businesses, or about 80 percent of the total, reported receipts of less than $50,000. By non-employer businesses, we’re talking about a wide-ranging group, from freelance writers and fashion designers to real estate agents and taxi drivers who work for themselves—as well as necessity entrepreneurs who were pushed into self-employment by a rough job market in recent years. Those numbers are from the U.S. Census Bureau, which released its annual report on non-employer businesses yesterday. As for where they worked and what jobs they did, a couple of tidbits worth noting: • The number of non-employer businesses in North Dakota increased 4.3 percent, while the state’s non-employers’ sales increased 13.2 percent, to $2.3 billion. That’s the biggest sales increase nationwide. (Check out Kasia Klimasinska’s story on the complementary service businesses women are starting in North Dakota, sparked by the shale boom.) • Finance, insurance, and construction were the only industries nationwide to show fewer non-employers in 2011 than in 2010. • Fittingly, the fastest-growing sector in 2011 was what the Census Bureau lumps into “other services,” which includes auto repair, beauty salons, and dry cleaners. One reason the economy of non-employers might keep growing: The Affordable Care Act, the bulk of which takes effect next year, will make it easier for self-employed Americans to buy their own health insurance. To that end, the Robert Wood Johnson Foundation estimates that their ranks will swell by 1.5 million in 2014.

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Memphis Entrepreneur Academy

313750_449892245097739_1322106670_n[1]Memphis Entrepreneur Academy (MEA!) is a groundbreaking and exciting summer program class that transforms young students into real, confident entrepreneurs. Throughout the class, students develop business ideas, write business plans, conduct market research, pitch their plans to a panel of business owners, and actually launch and run their own real, legal, fully formed companies and social movements. Complete with dynamic guest speakers from the local business community and exciting trips to local companies, the fun, projects-based MEA! MEA approach empowers youth to take charge of their futures in a profound way. Our mission is to inspire children to thrive for higher goals, good citizenship, to conduct themself as to bring credit to themselves, family and community. To develop future leaders for our community and nation to build a better economy for the future. Memphis Entrepreneur Academy is a summer program for ages 10 to 16. The program will be in in session from June 3rd till July 19th 2013. A draft_lens2342808module13124299photo_1230058518kids_in_business[1]program where children are inspired to develop a healthy lifestyle, develop creative initiative, entrepreneurship agility and civic literacy in a community environment. * What is the MEA? A program where children are inspired to develop a healthy lifestyle, develop creative initiative, entrepreneurship agility and civic literacy in a community environment. * How did you come up with this concept?  I wanted to be able to develop future leaders for our community and nation to build a better economy for the future. * What will this do for the students who enroll? Throughout the class, students develop business ideas, write business plans, conduct market research, pitch their plans to a panel of business owners, and actually launch and run their own real, legal, fully formed companies and social movements. * Why is this important for young people? To be able to develop the necessary skills not only contribute to community but also able to develop a partial product that can be used. * What can business owners do to help with the MEA? We would like business owners stop by and just talk with kids and share their knowledge.

* As a city, what would you like to see Memphis doing to make a bigger impact in the lives of young people? Allow our youth to develop into leaders, future business leaders and also have a stake in their community.kids-lemonade-stand[1]

*You have been spending your Friday mornings with a class of young men; tell us about what you are doing, why, and what impact you hope to have? I have been talking with young men about their future and how they can control their destiny.

*How parents can get their kids involved? For more information on the Memphis Entrepreneur Academy, please contact Kelly D. Price, Founder/CEO (901) 451-2900 memphisacademy1@gmail.com www.mymeakid.org

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Business Networking Tips to Kick Off 2013 by Kelly Price

Business Networking Tips to Kick Off 2013252452_2028804288676_1501150877_32211565_2435669_n

  1. Arrive time:  You want to make the most of an event?  Stay late.  Why? Not everyone arrives early or stays late. Arriving early and staying late gives you the opportunity to meet professionals with varying schedules and you have more time to get to know the people you just meet.
  2. Remember, business relationships are a two-way street:  It’s OK to talk about yourself but the best compliment is to ask a lot of questions about the person and their business.
  3. Ask open ended questions and listen: This highlights ways you can add value and meet needs other professionals might have. It’s like dating:  the more questions you ask the more the person feels a connection with you.
  4. Stand.  Why? Sitting signals that you are having a private conversation, or otherwise busy with your iPhone. Sitting should be reserved for serious conversations and follow up meetings. Don’t be a wall flower.
  5. Know your current perspective:  Connecting with like-minded professionals can give you inspiration, insight and the inside scoop on emerging trends and needs within your industry.
  6. Wear a nametag:  Why? Everyone attends a networking event to meet new people, so don’t be shy!  Say hello, mingle and introduce yourself. Make sure your nametag is written clearly with your name and business name for others to read.
  7. 50/50 rule: Spend an equal time with people you know and meeting new people.  The more people you meet the easier it get when you attend your next event.
  8. Pay it Forward: the best networker is a connector, someone that refers business to other people without thinking about themselves but thinking about helping others in networking. This will help you in the long run by getting more business and contacts in the future.
  9. Elevator Pitch: Have several Elevator pitches ready for your event.  This way, if someone already heard your last pitch they can hear another one which might help them find you more business and or know more about you and your business.
  10. Volunteer: The best way to meet everyone at an event is to volunteer at the front sign-in desk. This way you can meet the people you want to talk to and it will save you time.
  11. Share relevant news: Sometimes we all like to talk about ourselves but knowing about current events, business news and other relevant events will give you something to talk about.  By doing this, it will make you more memorable.
  12. Networking groups: A good way to grow your business is to join a Chamber, to increase your business and get your name out there. It’s just like customer service the more you have contact with your current and past clients the more likely they will refer more business your way.
  13. Network, network, network: Try to visit at least one event a week. The more you network the more business contacts you gain which will result in more business.  If you don’t network, your business won’t grow and no one will know about you and your business.
  14. No limp handshakes and eye contact: the worst thing you can do is to give a really bad handshake, remember you want to give a good first impression. Always have eye contact with the person you’re talking to, by not looking in their eyes it could show that you’re not telling the truth or hiding something.
  15. Have a professional looking business card: If you break out a business card, make sure it’s high quality. Don’t start a conversation by giving a person your card first, it’s really tacky.
I hope for some of you is to network more for 2013 and by reading this I hope you’ll be a more prepared networker for your next event. Networking is about spending time getting to know people and getting your name out there.

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When I Began My Networking Journey

When I began my networking journey, I attended any and all networking events as time permitted. Every event was fair game! Today I am much more strategic in my networking endeavors. I discovered which events and organizations gave me the best return on my investment of time as well as how to be an effective, caring networker.

In order to know where to begin you must first understand what networking is and why it is important to grow your business. Networking in its purest form is simply talking to people, making connections and developing rapport to grow our circle of influence. Business networking is essentially the same except that our primary objective in business networking is to help us grow our businesses. For most of us, building a network means meeting people we can do business with or who will do business with us, or refer people who will do business with us, are our ultimate goals.

In fact, some of the best networks are those created by people who own and run their own businesses. When you create valuable networking relationships, you build them on a foundation of mutual trust, sharing knowledge, experiences and resources to help one another grow your businesses by either referring one another or doing business directly with one another.

It works like this: If you do a good job, one customer might tell three to five of her colleagues, family and friends about you. Whereas, when you build a network of say 10 to 20 strong advocates, they may each tell only one person about your, however your “exposure” is now more than doubled – With the right network, the ultimate in “word of mouth” marketing takes place. You promote your network, and your network promotes you.

I host events – I started an event called Networking in Memphis more than 2 years ago at Jack Robinson Art Gallery. It is an intimate gathering of women and men of all different interest and wish to expand their own circles. Have you ever attended a BNI or Le Tip or other form of structured networking groups? Perhaps you are already a member of a similar group. If not, you might consider becoming involved in one to the fastest growing business networking concepts around. These groups invite business professionals to join on an exclusive basis. That means, that if you are a chiropractor and become a member of one of these groups, no other chiropractor will be invited or allowed to join.

These groups have regularly scheduled meetings (anywhere from monthly to weekly) with a list of rules and objectives to which you must abide. In some cases, a minimum number of referrals are required to participate. In others, simply doing business with one or more in the network is all that is asked of the members. However, keep in mind that for this type of networking to be worthwhile for all parties, each must make every effort to do business with other members of the group.

If this form of structured networking isn’t for you, there are other options for finding potential networking venues and partners. Here are some ideas to help you on your way to networking success.

a. Develop a joiner’s mentality. By that I mean, don’t just sign up to get our name on a roster. REALLY JOIN. Get involved. Participate in discussions, events and BE VISIBLE. The saying “out of sight, is out of mind,” holds true when it comes to networking. I have been involved in groups and decided to take a hiatus from attending for 2 to 3 months (and sometimes more) only to have people come up to me and tell me they forgot the name of my business so they had to find someone else either through a friend or through the local phone book. BUMMER!

b. Get involved in a community service groups.

c. Volunteer with a non-profit organization, whose mission you are passionate about and believe in. People who have similar passions will want to do business with you.

d. Look for ways to cross-promote with businesses that complement yours. For instance, a spa might join with a health food store or restaurant and promote their products and services for staying healthy. A salon might join a florist to promote weddings or proms and a realtor might join with a mortgage broker to promote a “one-stop” experience for home buyers. At networking events you can look for people who can help you with that.

e. Interview others. A great way for me to network is to interview people for projects I am working on. Since most people are flattered when you ask their opinion about something or experiences in life, this has been a great means of increasing my own circle for various reasons. I might interview a woman or a man about an article or book I am writing, or a seminar I am developing. People love to share their stories.

Make it a point of attending one networking event a month; make a list of the people you know, the organizations you have heard and read about and the companies who currently do business with you. The best networking begins with planning and taking action. Being strategic in your planning is important to your ultimate success as an effective, caring networker.

by Kelly D. Price

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The Big Banks’ Reputations

Big banks’ reputations have taken a hit over the last few years, starting with the financial crisis and culminating with the Occupy Wall Street protests. Meanwhile, small businesses have been cast as the economy’s earnest underdogs, generating rhetorical support from Congress to the campaign trail to Wall Street. So it’s no surprise that Bank of America, Chase, Citibank and Wells Fargo were eager to release seemingly impressive small-business lending figures for 2011. Problem is, many of those loans may be going to businesses that aren’t that small.

For lending purposes, the nation’s four biggest banks define small businesses as those with annual revenues up to $20 million, an amount far higher than many businesses on Main Street will ever reach. This could explain the ongoing disconnect between big banks’ upbeat lending reports and the 61 percent of small-business owners who say it’s harder to get loans now than four years ago, according to a study released in January of 2012 by the American Sustainable Business Council, Small Business Majority and Main Street Alliance.

Sarwan “Rimpy” Singh, owner of seven Taco Time restaurants in the Portland, the area experienced disconnect when two big banks rejected his application for a $300,000 loan to buy property he is leasing. One bank told Singh it doesn’t give loans to restaurants because they’re high-risk, though Singh has been in business for 16 years, has excellent credit, a sizable down payment and has been a longtime bank customer. Earning $2.5 million to $3 million in 2011 revenue, Singh said he wonders whether he’s at the wrong end of the revenue spectrum when it comes to borrowing. “There are a lot of mixed messages from the big banks,” he said. “That definition is completely wrong. They have no clue what a small business is.”

In other words, big bank loans to so-called small businesses may very well be going to businesses closer to the $20 million end of the revenue spectrum. Without more transparency, it remains unknown. “The big banks make their small-business lending numbers look as good as possible by stretching the limits as far as possible,” said Ami Kassar, founder and CEO of Philadelphia-based MultiFunding, which helps small businesses find the best loans available to them. “They include companies with up to $20 million of revenue. These companies are less risky, and less complicated to lend to. They also require larger loans that make the big banks’ total small-business lending numbers look much better.” Big banks’ definition of small business also differs from that of government agencies that monitor small-business lending. These agencies tend to adopt the Federal Deposit Insurance Corp. call reports definition of small-business lending — business loans in the amount of $1 million or less. Based on this definition, the Small Business Administration Office of Advocacy reported that total outstanding small-business loans fell 1.2 percent to $599.7 billion in the third quarter last year, from $606.9 billion in the second quarter, while small-business loans by the big banks were nearly flat for the same period. The Federal Reserve and the Office of the Comptroller of the Currency have also adopted this inter-agency definition, though the Senior Loan Officer Opinion Survey published by the Fed defines small businesses as those with sales of $50 million or less. The Treasury Department does not have a definition of small businesses or small-business loans, but adheres to specific parameters for its two small-business lending programs, the State Small Business Credit Initiative, which targets borrowers with 500 employees or less with loan amounts not exceeding $5 million, and the Small Business Lending Fund, which offers business loans of $10 million or less to businesses with revenues up to $50 million.

Even small banks use a narrower definition of small businesses than the big banks. Umpqua Bank, a community bank serving Oregon, Washington, Northern California and Northern Nevada, defines small businesses as those with $1 million or less in annual revenue. Umpqua lent more than $328 million in 2011 to these small businesses.

To put the “small business” population in some perspective, of the 27,486,691 total businesses that filed taxes with the IRS in 2003, the most recent year for which statistics are available, 26,226,922 or more than 95 percent and less than $1 million in total revenues.

by Kelly D. Price

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Where’s Our Stimulus? Did it create jobs for Shelby County and Memphis?

The U.S. government has pumped billions of dollars into the economy to stabilize the banking system and keep money flowing, but not much is trickling down to small-business owners. It can and  does get a little frustrating when we have seen the big banks, the corporations and the automakers that have made horrible, horrible choices get bailed out, while those of us who work 12 to 14 hours a day, six to seven days a week, we can’t get any help. A survey released by the National Federation of Independent Business Research Foundation revealed that only 40 percent of small-business owners who attempted to borrow money last year had all of their credit needs met. That compares to a 90 percent success rate in the mid-2000s.

 As part of the 2009 American Recovery and Reinvestment Act (signed Feb 17, 2009), the United States Government has allocated SBA backed funds for viable small businesses in the United States. Business must have qualifying business loans and must be experiencing immediate financial hardship. Qualifying recipients of the America’s Recovery Capital (ARC) Loan Program may receive up to $35,000 in short-term relief. Each small business is limited to one ARC loan. ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans are intended to provide immediate capital to small businesses to make payments (principal and interest) on existing debt and thus allow business owners to sustain and retain jobs. ARC loans are interest-free to the borrower and carry a 100% guarantee from the SBA. Loan proceeds are provided over a six-month period. Repayment of the ARC loan principal is deferred for 12 months after the last disbursement (18 months from the first disbursement), followed by a repayment period of five years. Good candidates for ARC loans are small businesses that can show a profitable past, but are currently struggling to make loan payments or are just beginning to miss loan payments due to financial hardship. ARC loans are made by participating commercial SBA lenders. The SBA will pay these banks a monthly interest rate throughout the term of the loan. ARC loans will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first. When President Obama signed the 840 billion dollar American recovery and reinvestment act into law in 2009 Memphis received a total of nearly 640 million dollars. “Community health centers, monies went to the Memphis Health Center, and the Christ Community Health Center, we’ve had money go to all kinds of women’s shelters, any federal program has been effected,” says 9th District Representative Steve Cohen.  “The stimulus has helped keep us from a deep recession and get us to where are coming out of it now.” Critics say hundreds of millions of our tax dollars were spent and unemployment in the Bluff City dipped only slightly from a staggering 12-percent in January of 2010 to 10-percent in May of this year. Conservative talk show host Andrew Clarksenior calls the stimulus package a bust, “It has brought needed funds to needed projects, but it has not been the panacea that the good congressman would make you think…by and large, the majority of that money was wasted, and misapplied.” Clarksenior points a few projects that were well meaning, but questions if they deserved funding. The Memphis Orchestral Society, the Center for Southern Folklore and the Beale Street Caravan received a total of a $125-thousand dollars to keep jobs that might have been lost because of the recession. Nearly a half million dollars went to the University of Memphis Math Department to create better traffic patterns. “It was a big lie.  Not just here but all over the country.  The “pork-u-lus bill, however you want to call it was terribly misspent,” says Clarksenior. In Memphis, the stimulus money was intended to create jobs, but millions was spent to help a social network already under stress.  More than 10 Million dollars used on housing for the poor and people diagnosed with AIDS/HIV.  Nearly 4-million dollars spent to improve emergency shelters in case of an emergency, almost 108 million dollars on public education in Shelby and Memphis even though teachers were laid off.  All that money spent and exactly how many jobs were created?   It had been estimated 68-hundred would be created, no one knows for sure.  The federal, state and local governments can’t give a total. When will we wake up as a community? by Kelly D. Price

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The Truth About Bain: Inside The House That Mitt Built

Among the private equity deals of this century, HCA stands among the very best. Bain Capital partnered with KKR and Merrill Lynch to buy the hospital chain for $33 billion in November 2006. Bain invested $1.2 billion for a 25% stake and recovered almost all its money with a trio of special dividends in 2010. The Boston firm pulled out another $457 million when HCA went public again in March 2011 and still owns shares worth almost $3 billion. Despite the financial crisis and periodic whiffs of scandal swirling around the for-profit hospital chain, HCA is worth 26% more today than it was seven years ago, and Bain investors have more than tripled their money. If only they could all turn out like HCA. But they haven’t. Not even close. Actually, few of Bain’s biggest deals since buying HCA have panned out so far, leaving it with a decidedly middling recent investment record far outstripped by its mythology. Bain Capital has endured more dissection, debate and criticism this year than any firm in the half-century-old history of private equity, owing to its founder, GOP presidential candidate Mitt Romney, who launched the firm in 1984. Yet even after all this it remains among the least understood, due to its insular nature and distracting history. While both the White House and Romney himself focus on Bain’s job-creation record, no one has gauged the firm using industry-standard metrics to see how well it has performed in its core mission: making money for its partners and investors. An exclusive analysis of the firm’s returns conducted by FORBES reveals that despite the hype surrounding Bain, investors in the firm’s biggest funds, raised in 2006 and 2008, would have been better off in a simple stock index fund. And while Bain churned out serious returns for partners and investors alike during Romney’s tenure, it’s that reputation, rather than results, that has carried Bain for the past decade. Stephen Pagliuca, a managing director of Bain Capital, defends the firm’s recent record: “We are in the business of being long-term right.” Good thing, because it could take a while. Over the past three months FORBES dug into the financial performance of every company Bain has invested in for the past decade, as well as the returns of Bain funds that raised some $42 billion in capital and commitments since Romney stopped working there in 1999. We also talked to some of Bain’s competitors and analysts, to understand how the firm does business. What we found: While funds raised through 2004 maintained the upper-quartile performance typical of Bain during the Romney years, returns for later funds  their biggest–have lagged as the company engineered multibillion-dollar buyouts of fragile consumer-dependent companies like Toys “R” Us, Burlington Coat Factory and Guitar Center at the peak of the 2005-08 private bubble. Those investments may yet recover, but they speak to a culture where reverent faith in decades-old techniques, rooted in consulting, have not kept pace with a new age of dealmaking. Bain exemplifies a worrisome trend for private equity as a whole. Megashops like Bain, with tens of billions to deploy and an insatiable need to buy, make profitable exits increasingly difficult. Mix in the meltdown and the tepid recovery, and you’ve got a toxic brew for investors, which include some of the nation’s largest pension funds. Clear Channel Communications epitomizes all three of these issues. Bain and buyout firm Thomas H. Lee Partners bought the nation’s largest group of radio stations for $24 billion in July 2008, including $2.1 billion in equity, just in time to watch the advertising market collapse along with the U.S. economy. Loaded with $21 billion in debt and a $1.5 billion annual interest tab, Clear Channel barely earns enough to cover its interest payments and capital expenditures. And even giving it an Ebitda multiple akin to the far more profitable Disney, for example, the company is worth perhaps 70% of what Bain paid for it. “It’s extremely, extremely levered–it was one of the last deals done during the bubble,” says Karen Klapper, a debt analyst with CreditSights. Her appraisal of Bain is the ultimate backhanded compliment: “They’re doing a good job managing their balance sheet and pushing out maturities so they don’t go into bankruptcy.” Avoiding bankruptcy wasn’t the goal when 37-year-old Romney established Bain Capital in 1984. With the encouragement of Bill Bain himself, Romney and two other Bain & Co. consultants set out to apply his mentor’s philosophy to private equity, making companies more valuable by increasing efficiency and finding new markets. Until his departure, Romney reportedly held all of Bain Capital’s stock and made a fortune by participating in the firm’s deals. “It was eye-opening, the techniques they were using to grow businesses and make business get better,” says Pagliuca, whom Romney hired as a summer associate at Bain & Co. in 1981. “The rationale was, this consulting work that worked so well with companies could be used for investments, too.” Romney built a team of dealmakers who mostly resembled him–young, many of them Harvard Business School graduates–who focused on rigorous analysis instead of investment-banking tricks like loading a target with debt so it could spit out a quick dividend (“Getting your bait back,” in private equity lingo, though Bain is not immune to this). For two decades it worked, spectacularly well. Bain Capital backed Staples, for example, after executives there determined that small businesses would patronize large stores carrying all their office supplies in one place. Staples returned 5.75 times Bain’s investment. Bain’s exits logged a staggering 173% annual internal rate of return through the end of 1999, when Romney stopped his day-to-day work to head the struggling Winter Olympics in Salt Lake City. Romney agreed to sell his stake in the firm to his partners in 2000, in a complicated agreement that gave him a declining share of firm profits over the next 10 years. He successfully ran for Massachusetts governor in 2002.   His presidential campaign has revealed Bain still provides a lucrative annual income stream from deals he invested in, which has caused political headaches aplenty. The biggest asset he bequeathed, in retrospect: a track record that turned Bain Capital into a fundraising machine, as pension funds, endowments and rich families sought to capture some of those dazzling returns. With management of the firm passed on to a committee of nine long-serving partners, Bain raised ever larger 10- and then 11-digit funds with the regularity of a congressional campaign. In 2004 it launched the $3.5 billion Bain Capital Fund VIII; in 2006, the $8 billion Fund IX; in 2008, the $10.7 billion Fund X. On some of these funds Bain has reportedly had the moxie to demand–and get–a 30% slice of profits after a minimum annual return to investors, rather than the standard 20%. Bain’s Fund VII, a quaint $2.5 billion, which started in 2001 just before Romney’s formal exit, was Bain’s only true success of the decade, returning $4.4 billion to investors for a solid 29% internal rate of return so far, according to PitchBook, a private equity monitoring service. The three giant post-Romney funds, however, would be considered failures if liquidated right now, all succumbing to the same traps too many other firms fell into: The huge sums raised made generating returns difficult and forced them to chase deals at nearly any cost, creating an asset bubble in the process. Fund VIII has generated an 11% IRR since 2004, placing it in the lower half of funds PitchBook tracks. Fund IX has returned 2.6%: in the upper half, according to PitchBook, but badly trailing the S&P 500. And then there’s giant Fund X, which has invested $7 billion of the $10 billion-plus raised. It’s actually lost money, according to PitchBook: specifically, -2% compared to a 14% return in the S&P over the same period. Even against private equity peers, Fund X ranks in the bottom quartile. (Some sophisticated investors disagree with this analysis. Matching cash flows into and out of Bain funds with identical movements into and out of the S&P 500, the Bain funds would have outperformed the S&P by 950 basis points, according to calculations obtained by Forbes. This so-called “cash on cash” return is higher because investors would have had their money with Bain during some of the market’s steepest declines, when PE tends to outperform, partly because its investments aren’t marked to market as often. However, other investors might look at the total invested in PE over the period and compare it with an equivalent buy-and-hold investment in the S&P. Under those conditions the S&P, including reinvested dividends, comes out far ahead.) Bain’s model hasn’t changed. As in the Romney years, Bain assigns teams of analysts to study potential acquisitions, often for months, before mounting a takeover bid. If Bain wins, it has an internal group of some 70 consultants who take to the field to advise portfolio companies on everything from upgrading their computer systems to calculating the profitability of a two-for-one special on fast food. The problem is that the rest of the industry has caught up to Bain: Blackstone, Carlyle and nearly every other large firm now deploy internal consultants to effect change among their acquisitions. “Bain Capital was very different 10 to 15 years ago, but other firms over time have copied that,” says Steven N. Kaplan, a professor specializing in private equity at the University of Chicago’s Booth School of Business. “The reason they were able to raise so much money in 2006, 2007, 2008 was because they performed so well in the past.” “What they started to do was believe a bit too much in their ability to fix companies, and they started paying more,” adds a partner at a competing private equity firm who praises Bain’s management skills but says it couldn’t overcome high prices paid for companies like Clear Channel, Guitar Center and Gymboree. “Those improvements don’t yield a lot of profit in a downturn.” Bain Capital’s partners can obviously do the math. They’ve reportedly lowered their profit share back to 20%. And while they’ve been almost uniformly silent this year, mutely watching as their firm’s brand has been made synonymous with greed. Pagliuca and John Connaughton, another managing partner and a close pal of Romney’s, agreed to discuss their track record with FORBES, deal by deal. In the big picture, the two partners argue, their bubble-era purchases may have declined in value from the peak, but they will still generate solid returns for investors over time. Clear Channel. Bain’s financial moves have drawn a lawsuit from disgruntled investors who accuse Clear Channel of extracting a $650 million loan from its 89%-owned outdoor advertising business at a “sweetheart” rate of 9.5% (Clear Channel bonds are currently trading with over a 20% yield, according to Bloomberg) and loading the unit with $2 billion in debt so it could upstream a dividend to its cash-strapped parent. Bain executives declined to comment on pending litigation. But Connaughton says Clear Channel will pay off eventually because the company is gaining market share at the expense of its smaller competitors. Bain has guided Clear Channel to add digital screens to its billboards and start an online broadcasting service, iHeartRadio, to expand the marketing reach of its 866 domestic radio stations. Revenue climbed to $6.2 billion in 2011 from $5.6 billion in 2009, and the company swung from a $3.7 billion loss to a $1.1 billion operating profit. “We’ve been growing the profit line for the last three to four years quite successfully” despite a flat ad market, says Connaughton, who joined the firm in 1989 and like Romney is a former Bain & Co. consultant and Harvard Business School grad. “Like any cyclical asset that goes through a down cycle, you have to ask yourself, ‘Is it a better asset than when you bought it?’ Clear Channel is.” HD Supply is not. Bain and two other private equity firms bought Home Depot’s wholesale supply business for $8.5 billion in 2007, just as the housing market imploded. Sales fell 22% from 2009 to 2011, and the company expects to burn through $200 million in cash this year. At eight times cash flow it’s worth $4.5 billion. Bain plunged into retail because the firm’s executives think they understand it better than most, thanks to their early success with Staples. The firm also likes restaurants, having quadrupled its money on the $1.5 billion buyout of Burger King in 2002. Now Bain owns Bloomin’ Brands, operator of Outback Steakhouse, Carrabba’s Italian Grill and other chains. It’s worth more than the $3.1 billion Bain paid in 2007, and Bain holds $1 billion in stock, a paper profit on its $874 million investment. Connaughton said a team of Bain executives spent more than a year studying their latest restaurant acquisition, the Skylark chain in Japan, which they bought for $2.1 billion last year. Bain figured it could use strategies it honed at Domino’s Pizza, Burger King and Dunkin’ Donuts to upgrade Skylark’s marketing as well as an electronic tracking system that helps management improve the quality of the food and service. Bain executives will push Skylark to adopt some of the aggressive discounts and advertising campaigns Bain used to increase sales at its Domino’s Pizza operation in Japan. “One of the best things we’ve done with a lot of the restaurant companies is drive differential growth through promotion,” Connaughton says. For every billion-dollar dud like Gymboree and Guitar Center you bring up to Pagliuca and Connaughton, they counter with something like Sensata Technologies, a maker of electronic sensors and controls Bain bought from Texas Instruments for $3 billion in 2006. The timing couldn’t have been worse: Three years later two of its biggest customers, GM and Chrysler, were in bankruptcy, and auto sales plunged. But Connaughton says Bain’s consulting model of private equity worked: They thought it could invest in new technology that increased the share of the electronics it put in each car. “We could put more controls and sensors in the cars,” he says, even if the overall market was flat. Bain took Sensata public in March 2010 and since then has sold stock for $1.4 billion, more than returning the $985 million in equity it put in. It still holds shares worth $2.8 billion, and the company is worth $5.4 billion. Bain loyalists also reject the charge that the firm has made money by slashing employment and paying itself debt-fueled dividends. Indeed, with these recent investments, there is little evidence it has. A close examination of the 40-odd companies it still holds a stake in, many of which file their financial statements with the SEC, reveals that most have maintained or increased capital expenditures–even as they took on much higher levels of debt. Pagliuca says he’s used to the intense scrutiny his firm is getting because of its famous founder: “The good news is this isn’t the first time one of our people has gone into public service,” says Pagliuca, who ran for U.S. Senate in Massachusetts as a Democrat in 2009 and is a principal owner of the Boston Celtics. And he acknowledges Bain could have bought some of its companies at a better time. But again he retreats to a low-bar defense: Almost all have made it through without defaulting. “You would have thought that if we had something like 1929, PE portfolios would have been wiped out,” he says. “But we expect our companies will deliver strong returns to our investors.” Bain Capital remains very much in the game. The talent is not fleeing for the exits, even after the election scrutiny. And they can still raise money, as evidenced by this year’s $2.3 billion Asian fund. But will Bain’s recent investors, who bought into the Romney-era track record and hype, earn more by owning companies like Clear Channel, Burlington Coat Factory and Toys “R” Us over the next five years rather than just riding the S&P? Especially once Bain’s fees are accounted for? Probably not. by Daniel Fisher, Forbes Staff

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From Prison to the Boardroom: A Story of Career Success

By Tracey D. Syphax It’s been 20 years since I left Rahway State Prison. For my last conviction, I received a 4-year sentence. Prior to entering Rahway I had already found myself in Mercy County Youth Detention Center at 17, where two detectives delivered my High School diploma and gave me strict instructions to never enter Trenton Central High School again. From 1980-83, I served time in Yardville Youth Reception & Correctional Center for possession with intent. Once released, I used my street smarts to start my first business on paper, Capitol City Roofing. It was a front to run drugs up and down The New Jersey turnpike hassle free.  I was 23. Within 3-years time I was headed back to Yardville.  An altercation during my bid landed me in lockdown 23 &  1 for 365 days in ad seg (administrative segregation) at Rahway State Prison.  That’s when my official pursuit for the American dream came to life. Unless you’ve been under a rock the past 10 years then you should be well aware that the prison industry is the second largest employer in state government. Prison stocks are traded on the New York Stock Exchange. The industry consists of over 10,000 employees and continues to grow as approximately 60% of inmates are arrested within 3 years after their release.  I was one.  I remember an older guy telling me during my 80-83 bid that I would be back. I figured out how the old guy knew I’d be back once I spent one year on 23 hour lockdown living the lyrics to Beanie Siegal’s 1999 album release “What Your Life Like.” Standing in my cell, those 16 words were poignant to me. Those 365 days in ad seg allowed me the opportunity to grow mentally, evolve as a man and recognize my weaknesses. I decided to seek out something different for my life. I became involved in a group that taught on African American studies.  I read about powerful black leaders – like Madam C. J. Walker and A.G. Gaston – who had strong entrepreneurial spirits and gained great inspiration from the words of W.E.B Du Bois. Du Bois was dedicated to the higher education of his race.  Entrepreneurship and education would be my focus upon re-entry into the community.

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Lesser-known Emancipation Document Gets Spotlight

WASHINGTON — Issued 150 years ago this week, President Abraham Lincoln’s initial proclamation that he would free the South’s slaves is enjoying a public showcase to match its increased profile among scholars. Lincoln released his lesser-known preliminary Emancipation Proclamation on Sept. 22, 1862 – 100 days before the final version. The first of the two documents has gained importance among historians as a turning point in the Civil War because of a change in thinking over the past 50 years. Slavery and its abolition were once treated by historians as minor parts of the story behind the Civil War, but that began to change after the Civil Rights movement of the 1960s, said historian Edward Ayers, president of the University of Richmond. Since then, the steps that led to emancipation have been recognized for their importance – with the Sept. 22 proclamation being a prime example. “All our thinking about this has undergone remarkable recasting over the last 50 years,” Ayers said. “People begin now with slavery as the fundamental fact and emancipation and less with union as being the sole focus of attention.” Commemorations began Monday with a forum moderated by Ayers at the Smithsonian Institution discussed the steps leading to emancipation. The discussion was broadcast to 100 schools, museums and libraries. The National Endowment for the Humanities also organized readings at the Lincoln Memorial. Meanwhile, the only surviving version of the preliminary Emancipation Proclamation in Lincoln’s handwriting will make an eight-city tour of New York state this fall. The official government copy from the National Archives will be shown beginning Saturday in New York City at the Schomburg Center for Research in Black Culture. Other exhibits will feature copies of the final version in the months preceding the Jan. 1 anniversary of its issuing. The preliminary proclamation served as a warning that if the Confederacy did not end its “rebellion” against the United States and voluntarily abolish slavery, then Lincoln would order the slaves freed on the first day of 1863. Lincoln believed it was a way to use his military powers to push to end slavery. Lincoln drafted the preliminary proclamation over the summer of 1862 but held off on releasing it because of Union defeats. He felt there was enough of a victory when Confederate forces turned back after the Battle of Antietam in late August that he went ahead. There was once skepticism among historians about Lincoln’s deliberate approach. For example, neither version of the proclamation covered five slave-holding Union border states that were freed in separate federal actions. But Ayers says most scholars now view Lincoln as shrewd. “What we used to see in some ways as a kind of political calculation, we now recognize as a necessary political ability to get things done,” Ayers said. Slaves also had decided by the time Lincoln was drafting his proclamation in the summer of 1862 that they had a role to play in the war, said historian Thavolia Glymph of Duke University. They were flocking to Union soldiers to declare allegiance with the North. “The preliminary Emancipation Proclamation essentially confirms, affirms what the slaves have been saying all along – that you can’t win it without us,” Glymph said. “Lincoln agrees.” Even before the preliminary emancipation, Lincoln floated several ideas about how to end slavery. In 1861, he put out a plan for Delaware and other border states that would pay people to free slaves they owned, though it was never enacted. He also was studying ideas about encouraging slaves to return to Africa or Central America to separate the races, historian Eric Foner of Columbia University said. His declaration that slaves would be freed was a turning point in a long process, Foner said. “No one person or one moment is responsible for the end of slavery,” he said. The government issued miniature copies of the preliminary emancipation that were distributed widely to soldiers in the field. Some survive and have been traded by collectors. The official U.S. copy with Lincoln’s signature was a paper booklet held together with a ribbon. It’s in relatively good condition at the National Archives but is rarely shown. It has been handled less than the final proclamation, which has endured long-term exhibition and exposure to light in the past, said Catherine Nicholson, an archives conservator. In recent years, researchers visiting the National Archives have become increasingly interested in seeing records related to emancipation, from the federal government’s Freedman’s Bureau and pension records for U.S. Colored Troops, said archivist Reginald Washington. Views on the history and impact of emancipation continue to evolve, Ayers said, while at the same time many people still separate black history and white history. “What historians have shown us over the past 50 years is that these are all part of the same history,” Ayers said. “Listening to just one of those stories is like listening to half a conversation. You can’t understand what was going on.” Visitors to the National Mall on a recent day, though, generally didn’t know much about Lincoln’s initial warning on slavery. Ray Morrison, a 64-year-old architect from Irvine, Calif., said he was familiar with the final version of the document but not its precursor. “I do recall that it was a tactic to focus the Civil War, because there were some defeats, to make it not a war of rebellion but a moral issue,” he said of the Jan. 1 document. Daniel Smith, 21, a student at Winston-Salem State University in North Carolina, said he had only been taught about emancipation coming in January 1863. “Nobody really knows what caused Lincoln to do the emancipating, so this gives more insight that he was planning on doing this,” Smith said. “This is just more knowledge we should know about.” By BRETT ZONGKER  

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Take the Juneteenth Challenge

Can you name 5 African Americans who helped end slavery–besides Frederick Douglass and Harriet Tubman?

Today is Juneteenth. This holiday, which commemorates the end of slavery, tells us as much about what America means as the Fourth of July, Presidents Day, or Memorial Day. What distinguishes the United States is our nation’s persistent struggle to make real a set of ideals that have been contested and contentious from the earliest days of the republic. It’s particularly worth remembering Juneteenth this year, as people across the country mark the sesquicentennial of the Civil War. Not that all Americans are drawn to commemorating that anniversary. Before the war began, over four million African Americans were enslaved. When the war ended, three-quarters of a million soldiers were dead, and slavery as an institution had crumbled. And yet, as Ta-Nehisi Coates recently observed, few blacks study the Civil War. Coates’ astute historiography demonstrates why, as he traces how both popular and scholarly accounts of the war have for 150 years downplayed the centrality of slavery to the conflict. Even today, he argues, the Civil War too often remains “a story for white people–acted out by white people, on white people’s terms–in which blacks feature as stock characters and props.” Even Juneteenth, a holiday celebrated by far more blacks than whites, can obscure the centrality of blacks in the struggle to end slavery. Juneteenth marks the anniversary of Union General Gordon Granger announcing in Galveston on June 19, 1865, that the Civil War was over, and that any slaves in Texas were thus free. The root of the holiday involves blacks waiting to be told their enslavement was ended. But nearly 200,000 blacks served in Union regiments, and still more contributed to the struggle as civilians. A century and a half later, their contributions are nearly all forgotten. Nearly all–in the spirit of multiculturalism, Harriet Tubman and Frederick Douglass have been given prominence in children’s books and school curriculums, at least in recent years. But as inspirational as their lives are, focusing solely on these two individuals reifies a sense of their exceptionalism, further obscuring the myriad roles countless blacks played in ending slavery. So, with all due respect to Tubman and Douglass, as we mark the sesquicentennial of the Civil War, it’s time to enlarge the pantheon of anti-slavery heroes we celebrate. Here are five examples of soldiers and civilians whose remarkable but little-known contributions exemplify what Americans should celebrate on Juneteenth: 1. Robert Smalls, the enslaved wheelman on a Confederate blockade runner, impersonated the ship’s captain one night to commandeer the ship, bringing the rest of the enslaved crew and their family members to freedom. After surrendering the ship to Union forces, he served as a pilot and captain for the Union navy. 2. Mary Bowser, born into slavery in Richmond, Virginia, was freed by her owner and educated in the North. After serving as missionary in Liberia, she returned to the South and became a spy for the Union Army–by posing as a slave in the Confederate White House. Inverting the assumption that blacks were incapable of intelligence, she provided critical intelligence, as part of an espionage ring run by her former owner. 3. Susie King Taylor, who as a young slave attended clandestine schools, was only in her early teens when she fled to the Union lines and became the first black teacher in freedman’s school, in St. Simons Island, Georgia. After marrying a black noncommissioned officer, she traveled with his regiment, serving as nurse and teacher to the soldiers. 4. David Bustill Bowser was a free-born artist active in both the Philadelphia Underground Railroad and in efforts to restore voting rights to black men in Pennsylvania. During the Civil War, he designed flags for at least seven and possibly as many as eleven different units of the United States Colored Troops (USCT), which served to rally black soldiers as they charged into battle. 5. Garland White escaped from enslavement in Washington, D.C., making his way to Canada. During the Civil War, he returned to the U.S. and helped raise enlistments for black units in New York, Massachusetts, Ohio, and Indiana, eventually serving as chaplain of 28th USCT. When the regiment entered Richmond, Virginia, after the fall of the Confederate government there, he was reunited with his mother, from whom he’d been sold away years earlier. These five individuals exemplify a breadth of activities, from education to political organizing, from surreptition to military service. Although you probably don’t have the day off, haven’t received a greeting card, and won’t be wished a merry or a happy, I invite you to celebrate Juneteenth by sharing other examples that further broaden our understanding of the active part blacks played in ending slavery. The Civil War and the abolition of slavery are neither white history nor black history. They are our American history. On Juneteenth, of all days, all Americans should remember the varied and critical parts that both free and enslaved African Americans played in ending an institution that was fundamentally at odds with the liberty and equality that are the center point of our nation. by Lois Leveen Author of The Secrets of Mary Bowser

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