Utah Business Blog

By Mark Adams, Owner of Fruition Design

I noticed a certain sense of optimism in the air as March came to an end. And for the glass mostly empty kind of guy that I am, that is big deal. Perhaps it was that spring was in the air; not very likely (at least for those of us residing in the Salt Lake Valley). Or was it more likely the recent gains in the stock market (DJIA +300 for the week ending March 27^th)? 

Several year’s ago, I had the opportunity to visit Japan on a business trip. As somebody who does not travel outside of the U.S. very often, I found myself enamored with the Japanese’ view of America, and American business. One thing that struck me was the Japanese’ long-term view on life and business. Perhaps this is rooted in their religious beliefs. Never the less, it was quite obvious that they had a less narrow minded, more systemic approach to their decision making process. A Japanese businessman said to me “you Americans have a very short attention span my friend”. 

I often think back to the Japanese view, and that quote, when I see the pendulum swing so violently as it has recently in the market. Listening to the economic pundits lately, one might think that the worst is now in our rear view mirror. If that opinion is the majority, than I would argue that we have learned nothing. So if we have indeed hit bottom and are rebounding upward, should we go back to business as usual (and employ the business practices of old)? 

Part of my optimism  was caused by the fact that my phone did not stop ringing. It seemed as if the orders were rolling in. To be honest, March seemed to have come in like a lamb, but was going out like a lion. While part of me wants to run out and hire more staff, I need to check my ego at the door. Have I learned nothing in the past year? 

With that said, I am now in a “wait and see” mode. But how long do I wait? What is a blip on the radar, and what is an upward trend? How does a small business owner know when he experiencing an anomaly, or when he is really on to something? I haven’t got much of a clue. All I know is that I will try to think more like a marathoner and less like a sprinter. Domo oregato.  

The views and opinions in this blog post are solely that of Mark Adams and do not necessarily reflect the views and/or opinions of Utah Business.

By Tyler Crawford, Luxul Wireless CEO 

The old adage that “the only constant is change” has never been truer than in today’s volatile markets. A typical day being CEO of a young, entrepreneurial company doesn’t allow for time to rest on your laurels. You’ve got to constantly be aware of industry conditions and trends and be able to make decisions in order to adapt, survive, and thrive in an always-changing market. If you can pull it off, the pay off and the experiences are great.

One of my favorite books to address the issue of change is called Who Moved My Cheese? by Dr. Spencer Johnson. It tells a profound, yet simple story of four characters named Sniff, Scurry, Hem and Haw and their experiences with change as their original cheese source dries up and they are forced to search for new cheese. If you or your organization is going through ANY type of change – whether it is new leadership, a merger, layoffs, having to do more with less … this book is for you.

At Luxul Wireless, we’ve seen our fair share of changes and have learned to adapt and find new cheese along the way. We’ve seen large customer deals evaporate, competitive environments heat up, complete industries collapse, and methodologies be modified. Each time, we’ve had to make adjustments to our strategies in order to find new opportunities and continue to grow our business.  

Luxul was initially launched as a Wireless ISP. Nine years later, we are a cutting edge technology company with patents, OEM relationships, distribution channels, and a worldwide customer base in many diverse markets. There are a few key principles that have served us well in navigating the changes in our market:   

1. Recognize and Play to Your Strengths: As mentioned above, Luxul was originally launched as a wireless ISP, using antenna technologies developed by us to gain an advantage over other competitors. Recognizing that the antenna technology developed to deploy our ISP was superior to other antenna technologies and that the ISP market was becoming crowded, the company sold the ISP business and quickly moved to fill a gap in the industry by offering products through an OEM (private label) relationship with a well-known networking company. We also sold directly to other ISPs and integrators of wireless networks. This move served to solidify the company as a technology leader and allowed for continued growth and advancement in a difficult venture capital (VC) market.
    
2. Continue to Innovate: After 9/11, wireless communications became an even higher priority. Requirements for coverage and speed increased as well as more users made the switch to wireless from other higher cost alternatives. At that time, we saw an opportunity to develop additional technologies that could be used to enhance and extend wireless coverage. With that in mind, we designed, patented, and launched a line of signal boosters (amplifiers). Making continual improvements to these and other Luxul products has allowed the company to stay ahead of the competition and maintain a technology leadership position. It has also opened the door to other OEM deals with some of the biggest names in the market.
    
3. Diversify and Penetrate Adjacent Markets: A big part of Luxul’s success is in having an understanding of the markets served and knowing other markets where our products would be valued. This understanding and vision has allowed us to expand outside of the traditional wireless ISP markets, and deliver the same products into hotels, hospitals, large enterprises, government, and even into home networking environments. Working through distribution and OEM channels to reach these various markets has also served the company well, allowing the same products to be used in multiple markets. Most recently, Luxul technology has been adapted for use in Depart of Defense (DoD) markets, being utilized to optimize networks and reduce costs in military communications. This ability to diversify has been a major factor in shielding our company against economic downturns and maintaining consistent growth in tough times.

These principles, 1. Play to Your Strengths; 2. Innovate; and 3. Diversify may seem simple in a static marketplace – but it’s what you do whensomeone moves your cheese that counts the most. While every company has its own unique challenges, these principles have helped guide Luxul in finding new cheese.

With every industry or market change, we find new opportunities for growth. If your company is in a position where people are scratching their heads thinking, where’d our cheese go? – It’s time to embrace change as it may be the only way to survive.  

About Tyler Crawford, Luxul Wireless Chief Executive Officer/Director

Tyler Crawford is the Chief Executive Officer and Director for Luxul Wireless, a leading innovator of patented high-performance wireless signal technologies. Tyler has been with Luxul Wireless since 2001, and has been instrumental in transforming the company from a wireless Internet service provider (ISP), into a technology- and now a product-company. He has led the company efforts in the development of its unique Clear-WAV Circular Polarization wireless technologies. Under Tyler’s direction, the company has also expanded into multiple industries, including hospitality, healthcare, home automation, and now government and military. In his current role, Tyler is continuing to grow Luxul Wireless with a focus on bringing its high-performance wireless products to new international markets and even identifying partners to OEM Luxul technology. Tyler attended college at Utah State University where he majored in Biological Engineering.

The views and opinions in this blog post are solely that of Tyler Crawford of Luxul Wireless and do not necessarily reflect the views and/or opinions of Utah Business.

By Dave Young, President of Paragon Wealth Management

Although Utah’s economy is one of the stronger ones in the United States, we have still seen it decline this past year.

During this time it is important to follow certain steps to keep and continue to build your wealth. It doesn’t matter what your income is, anyone can follow these rules and build wealth.

Many people believe that accumulating wealth is a random event or that pure luck determines who is wealthy and who isn’t. It is true that occasionally someone wins the lottery or receives an inheritance and becomes wealthy. Immediate wealth is usually temporary. Studies have shown repeatedly that most widows who receive a life insurance death settlement either spend, loan out, or lose the money they received within three years.

In order to build wealth you must follow certain rules. In order to keep wealth you must follow those same rules. If you never learn the rules or don’t have the discipline to follow them, you will not build or sustain wealth:

Step 1- Start Now

Step 2- Spend less than you earn

Step 3- Hire a Competent Financial Advisor

Step 4- Avoid Unnecessary Debt

Step 5- Avoid Large Losses

Step 6- Follow a Sound, Long-Term Strategy

Step 7- Be Patient

To be continued…

About the Author

Dave Young, President and founder of Paragon Wealth Management, started Paragon in 1986. Today he continues to invest and research ways he can improve his business to serve his clients better. His methods have attracted national and local attention. He has been interviewed by BusinessWeek, CNBC, the Wall Street Journal, the Deseret Morning News and other national and local media. He has also written articles for Utah Valley Magazine, Utah Valley Business Q, Utah CEO Magazine’s blog, Paragon’s blog called Money Manager’s Live and others.

The views and opinions expressed in this blog post are solely that of Dave Young and do not necessarily reflect the views and/or opinions of Utah Business.

By Dave Young, President, Paragon Wealth Management

Investment markets represent psychology in motion. In an effort to stay on the right side of that motion we are constantly evaluating all of the factors that affect investors. Those factors are many and varied but include good and bad “news”, media spin, company announcements, economic data and most recently the “political” impact.

For the past six months we have had more political impact on the markets than any time I can remember. I try to look at all political news objectively and evaluate it only on its market impact. Unfortunately, I think that both political parties often act in their own best interest rather than the people they represent.

The stock market sold off initially, through September, as a result of the credit, banking and real estate crisis. It was a fairly normal bear market at that point. Then as the negative political rhetoric intensified and the media amplified it we saw extreme fears enter into the financial markets. As it became clear that Barack Obama was going to win the election the markets sold off further in anticipation of the uncertainty created by a change of leadership. That market sell off followed the pattern of previous elections years when the incumbent party loses.

After the election, the market stabilized and there was an expectation that Obama would move from the left to the center. Also, there was an expectation that the media would begin to spin more positive news once their candidate of choice was in. Those would be positives for the market.

Unfortunately, the “stimulus” package that was recently passed changed those expectations Prior to its passage Obama and company pledged change. They promised transparency and bipartisanship. They promised a stimulus package to “jump start” the economy. This was advertised as change we could believe in.

With no time allowed to read or review the bill it was jammed through congress for approval. It’s hard for anyone to take a promise of transparency seriously when the bill is pushed through so quickly that it is not even allowed to be read.

Its passage re-defined the word “bi- partisan” when only three of the republicans (out of a total 219) voted in favor of the bill. The bi-partisanship promised was ignored and taken to even more extreme and negative levels than the previous administration.

Based on its contents, the “stimulus” appears to be no more than an excuse to pass an extreme government entitlement spending package. Unfortunately, only about 20 percent of this bill can be characterized as simulative. Most taxpayers wouldn’t spend a dollar to get 20 cents of value. The market voiced its opinion with a drop in the Dow Industrials of over 400 points since the stimulus bill passed.

Utah’s Governor Huntsman requested $14.4 billion and received around $1.5 billion. $1.5 billion out of a 787 billion dollar spending package isn’t much, considering Utah taxpayers will be paying for this for years.

The good news is that the market will still eventually recover. In the past 100 years we’ve been through 34 bear markets which were followed by bull markets. The stock market and economy have always recovered in spite of… not because of the actions of politicians.

About the Author

Dave Young, President and founder of Paragon Wealth Management, started Paragon in 1986. Today he continues to invest and research ways he can improve his business to serve his clients better. His methods have attracted national and local attention. He has been interviewed by BusinessWeek, CNBC, the Wall Street Journal, the Deseret Morning News and other national and local media. He has also written articles for Utah Valley Magazine, Utah Valley Business Q, Utah CEO Magazine’s blog, Paragon’s blog called Money Manager’s Live and others.

The opinions in this article are solely that of the author and do not necessarily represent the views and opinions of Utah Business.

By Dave Young, President of Paragon Wealth Management

There’s no shortage of self-proclaimed market prophets in Utah and throughout the nation. You can find them in the investment magazines, newspapers or CNBC. Although they can be entertaining, they provide no real investment value. They do not help anyone make money. In fact, investors who follow them are more likely to lose money than to gain it.

The way the forecasting game works is that the market guru, seer, pundit or executive continually makes forecasts in an attempt to gain public attention. By sheer luck maybe half of these predictions are proven right-meaning that at least half of them are wrong. On the occasions when the forecast turns out to be correct, the forecaster plays it up. Those many forecasts that don’t pan out (and those many investors who are financially hurt by them) are never spoken of again. In truth, you’re much more likely to get an accurate prediction of the future by listening to the weather forecasters. At least they inflict less damage when they’re wrong.

Yet despite mountains of data that show how ineffective the celebrity market forecasters are, they continue to make their predictions and many unfortunate people continue to base their financial decisions on shoddy, unproven advice.

Market professionals are not alone in their inability to forecast market behavior. Economists do just as poorly. Every six months the Wall Street Journal prints the results of a survey of leading economists who predict the level and direction of interest rates for the coming six months. 55 high profile economists currently participate in this semiannual forecast. You’d think such prestigious economists in such a high profile newspaper would know what they’re talking about, right? Nope.

If they’d just blindly guessed they’d have a 50/50 chance, but their actual educated predictions turn out to be much worse. And these are the best the industry has to offer!

So if forecasts are a waste of time then what does work? I am convinced that investors will only succeed when they are able to remove emotion from the investment process. Gut feelings are not a reliable investment strategy-even the gut feelings of so-called experts.

By Dave Young, President of Paragon Wealth Management

For many, a down economy typically translates into a downer mentality. This volatile market can be overwhelmingly discouraging, which leads people to sit at the kitchen table with their head in their hands, saying, “Tell me when it’s over.”

The good news is it doesn’t have to be this way. A less-than-ideal economy can lend itself to a better-than-ever situation. All you have to do is plan for it.

There’s no denying the economy is in trouble or that people are seriously struggling. The market has been obliterated over the last few months, coming in at levels it was 11 years ago. The world has been turned upside down.

The market, essentially, has gone through nature’s equivalent of the “100 year flood.” Meaning, that this downturn was one of the worst in the past hundred years—-excluding the great depression. And because of that, it’s more important than ever to be alert and proactive. That deer-in-the-headlights mentality isn’t going to do you any favors.

Stocks have gone down, and they’ll go back up. We just don’t know exactly when. So it’s essential to evaluate your options and look to the future.

The market is often described as psychology in motion. It’s all based on confidence. For example, going into the election, consumer confidence was down. The politicians were telling people how bad things were, and they were scaring everyone to death.

Then we elected the new president, and consumer confidence went up 11 points—that day. President Obama didn’t do anything yet — but the perception of what he might do positively impacted the consumer confidence numbers.

The bottom line, is when confidence leaves the system, everything comes to a standstill. People stop spending because they’re scared — despite the fact that they still have a job and their paycheck hasn’t changed. The right move, however, is to do the opposite. Normally, we have to scour for the kind of deals you can find in today’s market. But now the situation is akin to someone pulling up with a dump truck full of bargains and leaving it there for the taking.

Taking advantage of the incredible bargains requires strategy and forethought. You can leave it to random luck, or you can strategically position yourself for great returns. This may be the way to make lemonade out of lemons. Now is the time to position yourself in a way that allows you to capitalize on an opportunity that rarely comes along. UB

Despite what you may think, starting your own business in a recession offers opportunities

By Joseph R. Cardamone, President, United States Federation of Small Businesses (USFSB)

Often times, the monotony of punching the clock as someone else’s employee leads to day dreams of starting a business and being your own boss. In rough economic times, those day dreams may never pass beyond imagination. “Times are tough, how could I start my own small business now?” one thinks. That’s rational thinking, but, counterintuiviely, a down economy can actually create great opportunity for budding entrepreneurs.

There are a variety of benefits to starting a small business during poor economic conditions. For starters, office rents could be lower and suppliers may cut better deals. Downturns are a great time to sign new accounts. Customers are examining every expense for ways to save, including asking eager entrepreneurs for price bids in order to replace current and expensive vendors.

An unfortunate reality of hard times is increased unemployment. But, for small business owners, this means more experienced talent is available in the marketplace, with more affordable salary requirements.

However, as you can imagine, the grass isn’t all green for entrepreneurs making a start in a down economy.  It’s tough, very tough.  A down economy means tighter lending standards, higher prices on energy and food and weak consumer spending. Like those millions of entrepreneurs who started a business during the recession of the early 1990s, today’s dreamers need to ask themselves if they have the appetite for risk and fire in the belly to succeed as a small business owner. For those inspired to give entrepreneurship a go, here are some quick tips for starting a small business in poor economic conditions:

• Avoid the middle market products and services – Even in a down economy, consumers and businesses need necessity-based products and services – office supplies, tech services, food, medical assistance, waste management, etc. Conversely, an innovative luxury item can also be successful. Avoid the middle ground; if customers can delay purchase while times are hard or choose a less expensive alternative, that’s not the industry to be in.
• Don’t fret the big bucks – If start-up capital is an issue, consider starting a part-time business. Keeping a day job for a while can help maintain a steady income while waiting for sales from the new business venture to kick in. It’s also a smart way to work out kinks, gain industry knowledge and build a solid customer base without superfluous financial stress and pressure.
• Make equipment multitask – Technology products are getting smarter and helping people streamline. Many printers can also scan and fax. Another printer, the DYMO LabelWriter printer, both prints a variety of labels, and enables users to purchase postage online through DYMO Stamps. This enables professional looking mailings, without the commitment or expense of leasing a postage meter, all while saving trips to the post office.
• Strategize staff selection - Minimize full-time staff. Hire part-time employees. Contact the local college or university to see if they offer a formal internship program. In some states, interns can work for free or class credit only. Outsource or hire freelancers who can take overflow work or specialty jobs. Don’t invest precious resources employing people who may be underutilized. As business grows, you can consider adding more full-time employees.
• Embrace the guerrilla – Don’t spend a fortune on advertising. Use guerrilla marketing techniques to get the word out. There are hundreds of free or inexpensive ways to do business promotion: Distribute free product to attract people and secure repeat customers. Write a column for the local newspaper. Get involved with your local chamber of commerce. Network with other area business professionals. Display the company logo on a vehicle.
• Buy the business – Many businesses for sale are completely viable; the current owner has simply run out of time, energy or entrepreneurial passion. Although it may cost more up front, the purchase of a business can provide an existing foundation and income stream - ready to be nurtured and advanced to a higher business level.

Anytime can be the right time to launch a venture if the opportunity is right. During periods of a challenging market, big companies suddenly don’t take any risks; they retrench and bunker down. In contrast, entrepreneurial start-ups, small and agile, are out reinventing models. Great ideas, some savvy business sense and a passion for self-employment can overcome any type of economy. Good luck!

Joseph R. Cardamone is president of the United States Federation of Small Businesses (USFSB). Founded in 1983 by small business owners, USFSB advocates for the rights and interests of small businesses and the self-employed. Their mission is to help their members grow and prosper by joining together and effectively promote small business interests before local, state and federal lawmakers.

This podcast is of speaker Dr. Kelly Matthews, executive vice president and economist for Wells Fargo and Company at a Utah CCIM chapter event. He talks about how the real estate market can cope with the recent financial crisis in America and gives some suggestions on how to make the best of real estate in these hard times.

By George Spilka

As this article is being written during the fourth week of September, the U.S. is in the midst of its greatest financial crisis since the Great Depression. Congress is in the process of debating a proposed bailout package of the financial industry by the Federal government. This infusion of capital would be the most massive governmental intervention in the financial markets in this country’s history. Although the bailout has not been approved yet, I believe that it will by next Monday. If, Congress doesn’t approve it or an alternative package of comparable substance, there will be a complete freezing of the credit markets. The financial consequences will be the most devastating in the past 80 years.

What brought the country to the brink? – Very simply, the reckless, verging on idiotic, residential mortgage lending that took place starting in 2004 combined with the use of modern technology to design exotic financial derivatives that almost nobody fully-understood the consequences of. The massive use and distribution of these derivative products was almost completely funded by debt.

Why did it happen? – The crisis was fostered by a culture of greed that has permeated this country since the “dot com” explosion of the 90’s. This culture reached its apex on Wall Street, where the “Wall Street Whizzes” felt that no amount of money was enough. It was nurtured and brought to maturity by the easy money policy of the Federal Reserve under former chairman, Alan Greenspan. This resulted in the most excessive and imprudent lending and use of leverage seen in U.S. history. The consequences should have been realized by all at least 3 or 4 years ago. I assure you the eventual consequences of their actions were evident to the Wall Street Whizzes. However, why should they have worried? They already would have made a vast fortune from it. Their personal wealth would be secured before the problem became evident. Others could deal with the carnage. The others turned out to be the United States and the taxpayers.

What hasn’t happened in the financial crisis – The impact has been limited to the financial industry, which has been devastated by the losses sustained in the residential mortgage lending market and the losses related to credit default swaps and other derivative products. At the peak of the financial crisis on Wednesday, September 17 as financial institutions became concerned about extending credit to anybody; thereby almost causing a meltdown of the U.S. financial structure, the Federal Reserve and Treasury stepped-in and proposed the bailout package. This brought renewed life to the credit markets. However, while this scenario evolved, U.S. industrial companies (both manufacturers and distributors) had their strongest balance sheets since the 1970’s. There has been no massive borrowing by America’s industrial companies during this period, nor has there been any meaningful disruption in the manufacturing and distribution segments of our economy. The immediate impact has been limited to the financial markets, and this is where the impact will be contained.

As I survey the landscape, although the economic figures indicate the country is in a recession or an economic downturn (define it as you like), the profits of U.S. industrial companies remain strong. The results for public companies indicate that although profitability is moderating, it remains at historically high levels. My clients are realizing moderate to strong profit growth this year.

In my opinion, the intermediate and long-term impact of the financial crisis on the economy is going to be negligible, if any. I believe that by the 2^nd half of 2009 the country will be coming out of the economic downturn. My major concern regarding future economic performance is the amount of guarantees that have been made by the Federal Reserve and Treasury. These could possibly lead to a significant worsening of the Federal deficit. If it does, it will exacerbate our dependence on foreign countries and provide further opportunities for foreign sovereign wealth groups. In this scenario, without foreign governments increasing their already large purchases of U.S. debt instruments, we will likely have a significant increase in the inflation rate and a further weakening of an already weak dollar.

Obviously, this foreign ownership of America is not only a political concern, but it also has potential long-term business consequences. However, despite the aforementioned concerns, I believe the financial crisis will have limited impact on the intermediate and long-term economy.

Owners and executives of middle market companies, such  market defined as companies with a transaction price between $5-$250 million, will now continue to get their ceaseless level of calls from brokers, intermediaries and low-grade investment bankers. However their storyline will now be, either upfront or as a deal progresses, something similar to, “you better sell at a discount price before the carnage gets worse”, or “you should be thankful to receive this price due to current financial conditions”. There is no justification for those type of statements.

Most acquirers will tell you the devastation in the financial markets means you will have to accept a substantially discounted price. You will be told that pricing will be “dirt cheap” into the foreseeable future and might even deteriorate further. Don’t pay any attention; this is hogwash.

The Impact of the Financial Crisis on the Sale of Middle Market Companies

1.   Short-term impact – (up to 1 year) - There might (or might not) be a period of 3-6 months where there is some turmoil in the acquisition market. Conceivably, there could be a degree of transaction pricing weakness through the end of the 2nd quarter of 2009, but I doubt it.

2.   Intermediate-term impact (1-3 years) – There should not be any impact on transaction pricing, unless the effect on the Federal deficit of the guarantees made by the Federal Reserve and the Treasury have a greater impact than I believe they will. At this point, I don’t anticipate that happening. Therefore, I expect deal pricing to be similar to the 1^st half of 2008, which was reasonably solid.

3.   Long-term impact (3 plus years) – None. Many things will affect pricing, none of which will be the current financial crisis.

Based on my economic outlook, I don’t feel the financial crisis should have any significant impact on potential sellers of middle market companies.

The Recommended Course of Action

Don’t change the overall strategy regarding the sale of your company. If selling satisfies your personal and business objectives, you should proceed with the process. You might delay contacting potential acquirers until after the first quarter of 2009, but that will not be necessary in most cases. Furthermore, don’t modify your expected transaction price at this time. I am not reducing the pricing for any current clients.

For companies not yet in the market or ones at the very start of the sale process, whose fundamentals and business foundation are somewhat deficient, they might want to delay the sale, while they strengthen and reposition the company. However, where there is no need to strengthen the company’s fundamentals or foundation, I see no reason why approaching acquirers should be delayed past the start of 2009.

My overriding advice is don’t be intimidated by acquirer’s “doomsday scenarios”. The financial crisis has not changed anything in the industrial sector of the U.S. economy. Most companies remain very profitable and the intermediate and long-term business outlook remains good. Therefore, there should be no transaction price concessions. If patience is necessary, it will provide you a bountiful reward.

These are times when you truly need a strong-willed, determined, knowledgeable investment banker that understands the causation of the financial crisis and how it is likely to play out. They will provide you the proper guidance in how to proceed in these exciting, but turbulent, times. If you have this strength and expertise on your team, you will get a premium price. Don’t let acquirers intimidate you!! Don’t accept less than you deserve!!!