Blog

I was watching Suze Orman, a personal finance guru, on TV at Lifetime Fitness the other day.  She had a segment called “Can I afford it” where people  send in questions about whether they should make a certain purchase accompanied by their financial position, income debt etc.  There was no closed caption so I couldn’t hear the advice, but caught the gist of the answers, usually “no” given the inquirer’s situations.  As a finance guy I was somewhat amazed by some of the questions. 

I find it interesting that anyone would ask someone else about what they could afford.   I think many people go in to their mess by asking mortgage brokers if they could afford the mortgage.   What others can afford may have nothing to do with what I can afford.   Ms Orman’s usual answer was no, in light of the asker’s financial situation.  Sounded like common sense to me, but I’ve talked myself in to a lot of unnecessary unaffordable spending myself.

While I agreed with what I saw from a financial point, I think the solutions to our financial issues are deeper.  I have come to believe that what all of us really want is to have inner peace, a meaningful purpose and to survive in the world.  Included in purpose is to serve others, our employers, our families, our friends and others.  There are many benefits to having that mentality, better relationships that we all crave, and a  development of unselfish, greedy behavior that only compounds our financial problems to name only a few.  Plus, if we ever get to a position of power, we can coach others to do the same so they can also be successful.

 I recommend a similar solution to Ms Orman, with a few caveats.  First, take care of one’s needs then prioritize the other stuff.  (It is amazing how few real needs we have if we are honest with ourselves) Second, figure out if you can afford the other stuff given your individual cirmstances, and most importantly, determine whether the expenditure helps you meet your main goals of having peace.  Obviously, financial stress is one of our biggest “peace stealers” so we should avoid it as best we can.

Sound too simple?  I don’t think so.  I am one of the best at talking myself in to buying what I want and can figure out how to afford it most of the time.  But do I need all this stuff? 

I think this approach is simple and I am working on this myself with good results.  Less stress and more focus on what I can do for others both financially and emotionally.  It is difficult for me, I will admit that; I want everything also.  But when I get around those with less it makes me more grateful for what I have and that brings peace to me. 

These concepts allow me to pursue happiness, which our Declaration of Independence says our Creator established as one of our rights.  I don’t think we will ever reach a happiness nirvana, but by pursuing it we will be better off than waiting for it. 

StoneL was a young startup company that needed to raise some equity capital in order to move forward. They had developed a valve monitoring device and were ready to take it to market, but where would they go for equity and how would they get it?

One problem was that few people knew what a valve monitoring device was, and worse, few people cared! Wally Stommes, CEO of StoneL explained it to me very simply. In a processing plant there are pipes that carry fluids, on the pipes are valves that let the fluids out that are turned on and off via an actuator, not the kind of twist valve that I have on my outside hose that I think of. By putting a chip in it and letting it communicate to a central PC, a plant superintendent can monitor the processes to be assured that everything is functioning as required. Or in simple language, is the beer getting the right ingredients?

But even knowing that, or believing you understand it, would you invest in such a venture? Well, several people did, and each had their own reasons.

• One of Wally’s former professors understood the product, and believed in Wally and his partner Gerry Nelson
• A local guy that liked to invest in companies, knew Wally and Gerry and was willing to bet on the people and product as well as his interest in the community
• A Twin Cities entrepreneur that had very little understanding of the product, but was immensely impressed with the people and the fact that the founders were buying stock at the same price as they were offering it to him. They were taking no “free” founder stock

So, that is how they got started with angel money. They eventually attracted other investors from around the area and the Twin Cities, (including me, one of my best investments ever!) borrowed money from economic development organizations, and financial institutions. And through very frugal management they bootstrapped their way to survival. Profitable years were few, but they were becoming a well known player in their industry.

But, as most know, investors want an exit plan so for several years Wally spent a lot of time studying and talking with his competitors and possible acquirers. With this knowledge and the relationships he created, they sold StoneL in 2000 to a strategic buyer that understood valve monitors very well and needed the device to complete their product line. All the investors received a substantial return and all the lenders were repaid. With a NYSE company behind StoneL now, they are doing well, growing and building a new plant.

I worked with these people for almost 10 years, my final involvement being helping with the sale of the business. My first project with them was to arrange some financing when they were in a bind and had no idea where to get debt financing. I treasured the people relationship and the profit on my investment as did every other investor/lender that was involved. Just goes to show how profitable it can be to invest in and work with people that are unselfish, have integrity and passion for what they do.

I wrote this a year or so ago about a friend of mine who has inspired me to keep on keeping on.  I just learned today that he passed away.

He will be missed by many. including me

RETIREMENT

It was about 10 years ago that I met Don Harley through another client. Don produced acrylic awards, marketing them to various promotional item reps. A few years later he asked me to advise him in the sale of his business, which I did (although I didn’t do much) and he eventually he sold his business. The interesting part though is that he was 80 years old at the time, and wanted to sell because he had some other business ideas he wanted to explore. Today he is doing just that by marketing various hand drawings of products that he accumulated over the years as pieces of art. At first I thought he had “lost it”, but I was wrong again, he now has a display at the Minneapolis Institute of Arts in

Minneapolis! With the advent of computer drawings, his have become almost a lost art. He is working on selling his collection now and is presently having it appraised. Now he is 90, and has ideas for another business after he sells this collection!Retirement isn’t in his vocabulary. He has had many health issues such as stroke, cancer and other ailments that haven’t dampened his enthusiasm at all. I think the key to his success is his attitude and faith.He is one of the most “others-centered” people that I have ever met. He is constantly interested in what others are doing, including me by always asking what I am doing more than talking about his efforts. That and the constant sparkle in his eye have earned him the respect and friendship of many people.I have learned many things from him, including loving what you do, looking for opportunities, and keeping going. I am fortunate to have him as a friend.

Are loans “graded” on a curve?  Most lenders would say that they have rigorous standards for evaluting commercial credit requests.  In most cases that is true.  But some of the aggressive lending shops may grade on a curve.  IE if they have 10 credit requests in the house they may pick the top 3 to work on.  On another day the bottom 7 may end up in the top 3 for them.  I have placed loans with lenders by finding out when they are having a slow time thus getting my deal at the top of their list!

This is also true for examiners, although they also follow standards.  Will your loan fail the curve?  If banks start exiting poor performing credits will you become one of the bottom credits?  You may want to find out where you stand with your financing.