Expect an exciting year for small business ownership in Canada

Exciting ride ahead

This is the first Friday of 2012 and as I work through my e-mails, I’m weighing this brand new year and what it will bring. I expect it to be much better for most business owners than 2011.

The American economy is showing signs of improvement, there is increasing demand for Canadian oil and gas, the potash industry in Saskatchewan is doing well and it would appear that the U.S. housing market has finally bottomed out.

Canadian banks have become more aggressive in the provision of Canada Small Business Loans, employment here is forecast to improve and small business owners are anticipating a better year in Canada.

At the same time, the economy in Europe is shaky and is probably in for a very tumultuous year.

Our current government in Canada has not provided any indication of support or programs that would have a positive effect on small business, but they have maintained low interest rates and a sound banking system. At the same time, we have many business owners past 65 and looking to retire, with many leading edge baby boomers in the same frame of mind.

I expect this to be an interesting and exciting year for small business owners.

With volatility comes opportunity for those who recognize it and are able to act quickly on the changes in the marketplace. For business owners who are considering selling their business this year or the next, now is the time to get focused on the value drivers that will increase the value of your business.

Whether it is increasing sales/profits, eliminating customer or supplier concentration issues, improving the systems that operate your business, or improving hiring and training practices, the time to focus on these factors is now.

Many of us make New Year’s resolutions.  Few keep them.  If your New Year’s resolutions did not include a goal for your business, make this goal now. Ensure that your goal is a SMART goal— Specific, Measurable, Achievable, Realistic and Time-Based.

If you are thinking of selling your business, focus your goals and resolutions on the value drivers for your business. Sunbelt can help you with the process of selling and while we will maximize the amount you receive, it will be related to how well you have addressed your value drivers.

Great time to buy a business

For those thinking of getting into business, there couldn’t be a better time. We are at the beginning of a long uphill climb in small business.

Small business buyers generally fall into three categories:

• those who want to purchase a business in order to secure employment and build wealth and security for their family;
• those who want to purchase a business they can substantially improve and then resell;
• those who are seeking rapid expansion or synergies to increase margins and sales for companies they already own.

For individuals looking to purchase a business to provide their own job security and income, the beginning of an up cycle in the economy is a great time to buy. With many businesses underperforming, the cost to purchase is less than it will be two or three years from now. At the same time, you would be buying at the beginning of economic recovery so your odds of success are great. The success rate for Sunbelt clients who buy a business is greater than 98%, however buying at the beginning of a positive economic cycle results in greater success.

For those wanting to purchase a business that they can substantially improve then resell, there couldn’t be a better time to buy. There are currently many under-performing yet fixable businesses available for purchase. This strategy of buy, build and sell has made many entrepreneurs wealthy. Timing is an issue, though, so I would embark on this now.

Companies seeking rapid expansion or synergies are facing many opportunities. Private equity groups are looking for such investment prospects.  Many business owners who are preparing to retire have businesses that are not performing at peak levels; these same businesses would provide the growth and synergies the purchasing companies are seeking. The result is that there are significant opportunities in the small end of the midmarket and capital is available to take advantage of these.

We are anticipating a raft of small Merger & Acquisition (M&A) transactions with financing coming from private equity investors. The very low interest rates and volatility in the stock markets are making M&A investments look far more attractive and in Canada, real estate is already priced at the high end based upon current ROI and forecast interest rates.

Putting all this together, 2012 should be an exciting year for both business sellers and business buyers.

At Sunbelt Canada, we are looking forward to the busiest year we have had in a decade and it’s about time. The systems and people are in place. The training has been done.  The marketing is at hand. We are ready.  And we are pumped!

There will be wild ups and downs in 2012 that will create outstanding opportunities.

Hold on to your hats and enjoy the ride!

Our dive into the four DISC personalities

A "D" finds the deep end and jumps in

Jumping into a pool isn’t top of mind for most of us as we hunker down to face our Canadian winter. But that’s one of the things my team and I were thinking about earlier this week as we learned about the traits and preferences of the four DISC personality types.  Our training leader (Grant Mellow of ActionCOACH) used the pool analogy to help us grasp the differences between each so we could recognize them and adapt. We’ll “dive” into the details a bit later, including some tips you can use in communicating with your own team and customers. First I want to tell you why we were going through this exercise.

Most of you, like me, are business owners. We in particular have to be able to adapt to changing times and circumstances in work and life. Sometimes we need to learn new skills as do our employees. Such changes are harder for some than others. But once mastered, the individual and the business both benefit from the growth.

My recent changes include a series of steps to increase the number of businesses we have available for sale (our inventory) and closings (our sales). Among these are systems and training to better equip our team and their clients for success. The DISC exercise was structured to help us communicate with our prospects and clients in a manner that works for them.

While we’re a professional services firm, we are also a store. When buyers come to us, it’s important that we have the right business to enable them to be successful; to do this, we need to have significant inventory with a mix of every size and kind of business for sale. That was never a problem before the recession. But because of it, many owners have delayed selling, thinking there wouldn’t be a good market. [That’s wrong—businesses are still commanding a good price, although it will shift to a buyer’s market in a few years when baby boomers start to retire.]

More learning opportunities for business owners and prospective business owners

I’ll admit it—I’m a packrat. I hate throwing something out that may be useful to someone else or to me in the future.  It took the discerning eye of my wife, Gayle, for me to clear out all the equipment and material I’d stored in the large vault being converted into a new learning space at Sunbelt’s Ottawa office.  The existing meeting rooms just weren’t big enough to accommodate the number of people wanting to attend our business seminars or broker training courses.  So over the past few months, we’ve been renovating, and we’re now in a position to host more learning opportunities for more business owners and prospective business owners, starting with a series of free evening seminars on “Exit planning for business owners.”   We’ll have more details shortly.

Whether you’re thinking about selling now or several years from now, proper planning and preparation can make a significant difference in the outcome of the sales process.  We encourage all business owners to understand and take control of the factors that affect the value of their businesses and to constantly build for maximum return on investment.

Have you read our three posts on how financial, organizational and operational factors can help you build value in your business?  If not, you might want to do so now:

How’s your fiscal fitness? Get tips on financial factors to build the value of your business.

Can a potential buyer see himself in your business or are you blocking the way? The greater value comes when the business is making money without its owner’s involvement in the day-to-day activities. Read more about the organizational factors that build value.

Some operational factors–the state of your shop, warehouse, office, store–are fairly obvious, but do you know how your systems or lack of them add or take away value from your business?

And if you want to reserve a seat at our Ottawa Exit Planning series, please indicate your interest by registering here. We’ll have more details shortly. Or if you’re outside Ottawa and you’d like to be notified when we have added an event on buying or selling a business in your area, use our contact us form to request this service.

Building value in your business: the Inner Circle

Inner Circle peer advisory group now in Canada

How many of you remember Victor Kiam, the businessman who liked his Remington shaver so much he bought the company?  Well, the three Inner Circles I experienced in the U.S. impressed me so much that I bought the company – at least the Canadian Master Franchise.

Kiam said (and showed), “Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets.  The buck not only stops at their desks, it starts there too.”

Membership in an Inner Circle group can substantially improve the odds for entrepreneurs like us rolling the dice.  In a recent member survey, 97% reported better decision making ability; 75% reported higher revenues AND profits; 71% reported better work/life balance.

So what is the Inner Circle and its life- and business-changing power?

Selling a business: using marketing to increase value before you sell, part 3

Know the potential return on your advertising investment.

Last post, we talked about a) understanding who you are or want to be, b) identifying your target market and c) ensuring that everything you do is consistent with the image you are trying to create in order to be the very best supplier to your target market.

Today, we’ll address ways of communicating with your prospects.

Most of us are familiar with the standard advertising media such as direct mail, telemarketing, newspapers, magazines, radio, television, coupons, flyers, billboards and signage. These paid media can be effective if you have properly identified the audience you are trying to reach and the message you are trying to get across and you commit to the time it takes to achieve results. You need to determine who you are trying to reach and with what message, in order to choose the media that will be the most effective for your purposes.

You should also be looking at the potential return on your advertising investment. Higher revenue and higher profits (all else being equal) will result in a higher selling price for your business. I highly recommend getting expert advice about your advertising investment. Some simple rules such as including a call to action apply– if your outlay does not result in a prospect taking some action towards becoming a client then what is it accomplishing? Knowledgeable media sales people with personal integrity will help you make appropriate decisions about your advertising mix.  Advertising firms who help with your creative materials are also a good source of such information.

Selling a business: using marketing to increase value before you sell, part 2

Last post we talked about understanding your market niche and applying focus and consistency of image in product or service delivery to ensure you dominate that niche.  Today, I want to expand on how you touch your prospects and how a consistent image results in a better business.

Business owners often overlook prospect and client education, peer or client recognition, ambiance and effective testing to understand prospect and client perceptions.  Large companies regularly hire services to collect, analyze and report on their prospects and clients perceptions but those of us in small- and medium-sized businesses often ignore this or make assumptions that are wrong.

I was approached by a client some years ago to sell a number of their locations. They were not doing well.  After visiting some, I asked the client what business he thought they were in.  He said that they were in the business of selling bagels. I said that he was in the business of making his clients feel a bit better about themselves because they had patronized his location. 

Selling a business: using marketing to increase value before you sell

Singular focus can achieve transformational results in our businesses if it’s based on an understanding and channeling of who we are, what we have a passion for, what we can be the very best at and what drives our economic engine.  As we said in last post, Taking your business from good to great, that singular focus has to apply to all our activities,  so it extends to our marketing efforts.  Marketing is that which causes clients to come to you and keeps them coming back.

Dominate a niche market: be the very best supplier in that niche

In The Guerrilla Marketing Handbook, Jay Conrad Levinson states:  “In order to sell a product or a service, a company must establish a relationship with the customer.  It must build trust and support.  It must understand the customer’s needs, and it must provide a product that delivers the promised benefits.”

The goal is to dominate a niche market by being the very best supplier in that niche.  You may have to narrow the niche again and again to get it down to the one you can dominate. The starting point and qualifier for identifying what you will provide and to whom, is the selective focus we referenced above.

Bill Davidow, former Marketing VP at Intel, does a great job of describing the process of market segmentation and product development in his book Marketing High Technology.  As he says and shows, while “devices are invented in the laboratory, great products are invented in the Marketing Department”.

Taking your business from good to great

Determine what you can be the very best at

All things being equal, higher revenue and a better bottom line increase the value of a business and its appeal to potential buyers.  How we get there will be the focus of our next few posts.  But first, I’d like to take a short detour.  I recently read Good to Great, written by Jim Collins.

Criteria for moving from good to great

1. Combine personal humility and professional will to build a company that can run without you, rather than being indispensable.

Have ambition for the company and what it stands for. Your sense of purpose goes beyond your own success– build a company that can tick along without you. Focus relentlessly on tangible results and achievement.

2. First Who… then What:  start by getting the right people on the bus and the wrong ones off; then get your team’s input on where to drive the bus.

Select top performers that share your company’s core values and purpose, providing a basis for promoting from within and further reinforcing core values.

3. Confront the brutal facts of your current reality.  Sustain faith that you will prevail in the end.

Create a climate where truth is heard, particularly at the top.  Clarify what must be done to stimulate progress.  A Master Mind Group or Council like The Inner Circle where other business owners provide peer mentoring to help you clarify your vision and take appropriate actions.

4. Develop a simple, clear concept and consistently make improvements in systems and processes that improve performance. (See the related diagram where the three circles intersect.)

Selling a business: minimizing taxes when you sell

Minimizing taxes when you sell

Although our one-cent coin may soon be retired, those of us in business can still bank on the premise “a penny saved is a penny earned”.  And we don’t want to pay out one penny more than we have to in taxes.

When Sunbelt sells a business, the goal is to obtain a fair price for the business and for the sale to be structured in a tax-efficient manner. To capitalize on the best tax strategies for their circumstances, the seller needs the professional guidance of accountants, lawyers and financial advisers.

McCay Duff, Humphrey Law and Advanced Planning Group have contributed to this post on the two main tax structures in the sale of a business:  1) the shares of a corporation and 2) the assets of the business. Tax considerations and lead times are different for each option.

Selling a business: top operational factors to build value

Keep your Operations manual current and complete

If a hidden camera recorded the comments of prospective buyers touring your business behind closed doors what would it reveal?

Just like home buyers, prospective business buyers spot what’s worn, cluttered and dated.  Like moths to a flame, they’re drawn to the defects, adding up renewal and revitalizing costs.  Some may see the business as an opportunity; all will see it as worth less money.

Like financial factors and organizational factors, operational factors can add or take away value. We’ll start with the most conspicuous.

Clean up the shop, warehouse, office, store:

• Dirt and dust say you don’t care.  Show your customers and staff that you do.  Clean and freshen up all store, work and rest areas.
• Do your assets need repair or replacement? Deal with it.
• What about your inventory. Do you have more than you need to sustain average levels of sales? Sell off the excess. Take the same approach to eliminate unneeded files, procedures, equipment and programs.

Tighten up operations: non-performing or unsatisfactory employees, non-performing or unsatisfactory suppliers, slow or non-moving products or services:

• If an employee isn’t working out, let them know. Give them a chance to improve. Provide coaching, an improvement plan and feedback. If they’re unwilling or unable to improve, start progressive disciplinary action. The steps that you take when you prepare to fire an employee matter; you do not want to end up paying out thousands for unlawful dismissal. It’s best to talk to a lawyer to understand your options, says Jay Humphrey of Jay C. Humphrey Professional Corporation. Jay was one of several professionals who sat down with me  last fall to discuss ways owners could add value to a business.
• Are family members who work in the business competent in their assignments? Are they held to the same performance standards? They should be.
• Are your suppliers punctual; do the supplies arrive in good condition? If not, take it up with them. If they’re at fault, review the penalties. Can you just “walk away” and go elsewhere? If the contract isn’t exclusive you may be able to dual-source. If you terminate early, there may be penalties.  Again, legal advice may be in order.
• Do you set and monitor profit margins for each product? You may need to keep some slow-moving items in your inventory if they’re high profit or critical to operation. Consider discounting and selling the balance.