Anticipating changes that will affect our business

Where is your business going?

Much of our success as business owners and buyers depends upon our ability to anticipate changes that will affect our business. Failing to do so can cost us dearly.  When we correctly forecast the shifts and trends, we are able to see and act on great opportunities.

I have done both.

In the 80s, I anticipated that the companies running large IBM mainframes had such a large investment in the systems supporting their business that they would be reluctant to change this technology for many years to come, even though new technologies had come to the fore.

The technology that these companies already had—and were comfortable with— was effective.

So I invested in the building of products that substantially improved throughput as well as the management of large complex systems using their existing technology. My assumptions and predictions turned out to be accurate and we prospered. Thirty years later these clients are still using the technology.

However, in 1990, I built a sophisticated class A office building with the intention of filling it with local technology firms.  I failed to anticipate the economic collapse in Ottawa’s technology industry that occurred in 1992, the year my office building was complete. By then, there were empty buildings all across the city. I lost my shirt.

I have never forgotten the lesson learned and I want to share it with you today. The long term trend was for growth in the technology industry but the short term economic adjustment killed me before the long term trend could manifest itself.

Future of the Employees with New Ownership

Gary Stoetzer is a fellow broker with Sunbelt of Miami Valley. His post is a good summary of the change management a new owner should apply once the keys to the business are in their hands. One of the very first goals of a new owner is to get acquainted with existing staff and consultants—their individual needs, strengths and preferences—and to ensure that their goals mesh with where the owner wants to take the business. I talk about this in “You purchased the business, now what?”
In our dealings, though, we take precautions not to alert staff to the sale until all conditions of the sale are met. There are exceptions: occasionally an in-house accountant or other key staff members are necessary to a close and need to be brought into the seller’s confidence. But they must understand the need for confidentiality. Otherwise, employees will have questions the seller won’t be able to answer. And the insecurity may cause them to look elsewhere for a job. As buyers count on taking over a business with skilled staff, losing key employees could affect the sale of the business. That’s why we advise sellers to tell their employees only when the deal is done.

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Managing risk and reward—why use a business broker vs a realtor when selling your business

Business brokers are trained to sell businesses

Few realtors are business brokers, but a large number of business brokers are realtors. It’s an important distinction—especially if you want to successfully sell your business.

Question: What is one of the first things a real estate agent will do?

Answer: List your business on the Multiple Listing Service (MLS).

A listing in the MLS can immediately destroy the value of a business. Telling the world that your business is for sale can cause it to lose employees, customers and suppliers.

Business brokers have very different protocols for advertising, disclosing information and handling buyers:

More reasons to love Canada’s small businesses

Choose local small businesses

On Valentines’ Day, I posted my Top 7 reasons to love Canada’s small businesses, a short by-the-numbers post along the lines of what the Small Business Administration had just published in the United States. Clearly, small business owners are critical to our economic success.

But we all know that numbers aren’t the whole story. I wanted to follow up with some perspective on the business owners that these facts and figures represent.

I don’t know where the following originated. It’s been posted many places without an attribution. But it hits home.

Why you buy from a small business you support local families and local jobs.

When you buy from a small business, you aren’t helping a CEO buy a third vacation home. You are helping a little girl get dance lessons, a boy play hockey, a mom put food on the table, a dad pay a mortgage, or a student pay for college.  Our customers are our neighbours and our shareholders… they are the ones we strive to make happy.

Most small business owners are hands-on, working long hours every day. They care about providing great service. And relationships matter—some become like extended family.

I personally go out of my way to buy from local businesses over chains, even if it does sometimes mean paying a premium.  It’s important to keep them around.

These small business owners and operators hire our kids and grow employment opportunities for everyone within their community. Even with the long hours they put in their own businesses, small business owners are active volunteers in charitable organizations, freely giving their time, energy and knowledge. Their level of commitment goes way beyond that of the average Canadian. Non-profit organizations receive an average 250% more support* from smaller business owners than they do from large businesses.

So I say, show them some appreciation back—choose local, independently owned businesses first!

* see Sustainable Connections

Top 7 reasons to love Canada’s small businesses

Show our small businesses some love

Let’s show our small businesses some love. They deserve it.

As I’ve said here before, Canada’s small business owners take the risks and provide the imagination, the capital and the energy that drives the economy, jobs and wealth in Canada.

Last Valentine’s, I thanked the spouses who stand alongside or behind us in our businesses.

This year, I’m taking a page from the American Small Business Administration (SBA) and their Top 10 Reasons SBA is Sweet on Small Business.

Here are my top seven statistical reasons to love Canada’s small businesses. (Why seven, not 10? We don’t collect as much data on them here.)

Small but mighty

1. Small businesses are just down the street or block where we live and/or work—close to 1.2 million locations in 2011.

2. Three out of four small business owners started their business from scratch.

3. Between 2002 and 2008, about 100,000 new small businesses, on average, were created in Canada each year.

4. Small businesses  accounted for some 43 per cent of all jobs created in the private sector from 2001 to 2011.

5. Small businesses employed some 48 per cent of private sector workers in 2011, or some 5.1 million employees across Canada.

6. Small businesses  represented some 42 per cent of economic output produced in the private sector  in recent years.

7. Small businesses contributed $68 billion, 25 per cent of the value of all exports in 2009.

Impressive numbers, aren’t they!

Are there any others you would like to add?

Notes and references for the statistics:

Industry Canada defines a small business as having fewer than 100 employees.  Above that size, and up to 499 employees, a firm is considered medium-sized. In banking, small businesses are generally defined as businesses generating less than $5 million in annual revenues.

1. Industry Canada, Key Small Business Statistics – July 2011

2. Table 11. Industry Canada. The state of entrepreneurship in Canada.

3. Key Small Business Statistics -July 2012

4. Industry Canada, Key Small Business Statistics- July 2012

5. Key Small Business Statistics -July 2012

6. Key Small Business Statistics- July 2012

7. Canadian Small Business Exporters – June 2011

Considering a business partner? Proceed with caution.

A small business partnership is like a marriage—you need to choose your partners wisely.

Especially in business, many do not.

While you may have a stellar track record when it comes to your life partner, it can be more difficult to maintain the relationship with your business partner. I have been married to Gayle for 40 years and we are still enjoying life together. And I’ve successfully brought people together to partner in buying a small business.  But when it comes to the partners I’ve had in my own businesses, I’ve not been as wise.

One of the partnerships I have been involved in worked for 15 years; the others unravelled after two or three.

In the longest lasting one the partners were compatible, of the same age, capable, smart, honest, hardworking, each making great contributions.

But as time passed, our personal goals took us down different paths: one partner wanted to retire, one wanted to focus on their young family, minimize risk and maintain the cash cow while I wanted to continue to grow the business.

In other instances, I found out the hard way that the individuals were dishonest and in fact, stealing from the business. The temptation was there and we didn’t have proper controls.

What happened to me is not uncommon—more business partnerships fail than succeed. Yet some thrive. So how can you reduce the risk and set the course for success?

Selling a business in Canada: we wrote the book on it!

We have just published our first book—Insider Tips on Selling a Business in Canada, and what a great feeling!

I believe that we cannot be successful until we have made the people around us successful.

Likewise, if we can help enough other people to achieve their goals we will achieve ours.

In our line of work, these “other people” are the men and women who a) own a business,  b) want to own a business, or c) want to help business buyers and sellers through their professional services – business brokers, bankers, accountants, lawyers, wealth planners, business coaches, etc.

Most business owners have spent many years pouring passion and hard work into building their business and it is likely the largest asset they own. While many count on the sale of their business as part of their retirement planning, they do not have a solid understanding of how to prepare for it or what is involved. They know how to run their businesses to make them successful.   But they don’t how to sell one.

Business buyers’ market ahead–will you be ready?

Start thinking about the life you want once you leave your business

Some things shouldn’t be rushed. Time with your children while they are still young… a good meal with friends… a good book.

And for those who are business owners, add “selling your business” to the list.

With all that we try to fit into every day, setting aside the time for the truly important and meaningful activities can be/is difficult. Planning and good intentions go by the wayside. Yet not preparing for the sale of our business could cost us the very lifestyle we have worked so hard to build.

A CIBC World Markets’ report says that some 310,000 of us plan to transfer control of our companies within the next five years, a staggering number that represents half of all small- and medium-sized businesses in Canada.

Canada’s small businesses are worthy of respect AND funding

Which way to funding?

Canada’s small business owners take the risks and provide the imagination, the capital, and the energy that drives the economy, jobs and wealth in Canada. But they don’t get the respect they deserve, especially when it comes to funding for acquisition and growth.

It is a common misconception that banks provide loans for small business acquisitions. They do not. Business Development Canada (BDC) financing does not address the needs. Neither does the Canada Small Business Financing Program (CSBFP).

A Canada Small Business Loan (CSBL), which is limited to 75% to 90% of the certified value of Furniture Fixtures and Equipment (FFE) with an upper limit of $350,000, is only for the purchase of assets.

Over the many years I’ve been in business I’ve done my share of lobbying for new funding models. The Federal government listens politely to the proposals and does nothing. They prefer to continue supporting CSBFP- and BDC-financing, for which the vast majority of small businesses do not qualify.

The situation is quite different in the United States, where the Small Business Administration (SBA) will lend small businesses up to 70% of the purchase price providing the business has sufficient cash flow AND the government guarantees the loans.

More recently in the U.S., crowdfunding is being talked about as an alternative financing vehicle.

Invest in yourself as well as your business

Grant Mellow, ActionCOACH, in action at Sunbelt’s Ottawa office

A business owner must be able to seek out and take advice and keep learning.

Most of us have access to many networking and training options, both in person and online.

But our biggest obstacle is usually us taking the time out to attend. Yet we’re doing ourselves a disservice if we don’t. Maybe we need to turn it round and think of it as putting time in… to the business. It is the business—as well as the individual—that benefits in the end.

The lesson here is to work on yourself and on the business, or, as entrepreneur and motivational speaker Jim Rohn says, “Work harder on yourself than on your business.”