Your business may be hotter than you know. Private equity funds, trying to avoid dot-com carnage, are seeking out profitable, mature Old Economy companies. How old economy? Recent investments went to Dover Saddlery, in Holliston, Mass., and Greenwich (Conn.)-based Union Pen Co.
Of particular interest: family-owned companies that need money to grow, to help a founder retire, or to buy out other family members.
Family Capital Growth Partners just closed a $24 million fund that will make investments of $1 million to $3 million. Heritage Partners Inc. is raising a $150 million fund to invest in companies worth $10 million to $40 million, although Heritage partner Peter Z. Hermann says management depth is more important than company size. And these investors are seeking minority stakes. Says Chicago attorney Domingo P. Such III, an expert in small-company estate issues: "They're not looking to take over the company unless it's mismanaged." That's something new economy investors know plenty about. Squeezed out of the commercial real estate market? Not for long. Vacancy rates should reach 9.8% by yearend, up from 8.4% in December, says Merrill Lynch & Co.'s Steve Sakwa. That's good news for small companies, which could sublet from big companies that are cutting back. Nationally, Sakwa expects rents to drop just 5%. But it will be happy hunting in Cambridge, Mass., midtown Atlanta, and San Jose. If you lack elbow room in New York, Philadelphia, or Houston, get used to it. It sounds like heresy, but Amar Bhid?, a Columbia University B-school professor, swears it's true. After studying 100 successful entrepreneurs, Bhid? says they don't take big risks, don't suffer from a lack of capital, and they aren't great innovators.
Q: Don't entrepreneurs need to take risks to get going?
A: That's not risk. Many of them don't have much to lose. About a third had already lost their jobs when they started their business.
Q: Why do we credit entrepreneurs with being great innovators?
A: We romanticize. These things are a matter of fashion. In the early '60s everyone thought all innovations came from the Fords, the DuPonts, the IBMs. At the same time, people forgot that Polaroid was an entrepreneur. We all want a Hollywood version of the economy. It's just not the case. EMPLOYEE ARBITRATION
Employers won a big victory on Mar. 21 when the U.S. Supreme Court ruled that companies can require workers to take disputes to arbitration instead of suing.
CASE IN POINT
Lenel Systems International Inc., a 98-person software maker in Pittsford, N.Y., plans to take advantage of the ruling. Although Lenel has never been sued, it was recently threatened with a discrimination suit by a fired employee. Lawsuits, says general counsel Alex Zapesochny, "have the capacity to harm our reputation as a good employer."
How does arbitration work? See legal Web site Hieros Gamos at www.hg.org. Drafting a waiver is not a do-it-yourself affair, and hrnext.com details the problems a flawed waiver can cause. The American Arbitration Assn. (www.adr.org) has a guide to procedural rules. From the bookshelf: Mediating and Arbitration of Employment Disputes, by John T. Dunlop and Arnold M. Zack (Jossey-Bass, $41.95). Start Up, Monte Cristo Multimedia's video game, lets you run an imaginary company. For $19.99 you can choose a market, recruit talent, etc. It's just like real life--except for the add-on that makes competitors tamer. African American-owned companies made strides in number from 1992 to '97--but trailed in revenue:
26% growth in number of African American-owned companies
7% growth in the total number of companies in the United States
33% growth in receipts of African American-owned concerns
40% growth in total receipts for all U.S.-based companies
Data: U.S. Census Bureau LOAN STARS: Percentage of banks that say they increased the number of salespeople for small businesses last year: 65%
Data: Consumer Bankers Assn.