At the Speed of Fright (I Mean, Light)

The pace at which our world is evolving is one of those things that has become so common, we don’t always take the time to think about its impact.  Phones that are used to watch broadcast media, cars that don’t need gas or a driver to operate, personal “assistants” that can place orders on command, rockets that can essentially land themselves, mapping applications that make logistics a snap; these are phenomenal developments.  While these technologies and many others have made our lives easier, they have also presented significant challenges to the business community.  Consider the following:

  • Business model blow up.  The manner in which companies make money has changed dramatically in many cases, which cuts to the very heart of business; this is easily illustrated by the retail industry.  While stores used to be the primary shopping option, consumers now have access to a range of methods, including online, rapid delivery, subscription models, and mass media e-tailers.  Consumers have, in fact, come to demand these options, leaving companies to struggle to meet the pace of change, with many finding themselves in a too little, too late situation, unable to survive.  This disruption scenario is true in almost any industry.
  • Strategy break down.  In order to migrate a company through significant change, a key requirement is having a strategy that is proactive, comprehensive, and relevant.  These attributes are driven by having a thorough and timely understanding of the changes that are occurring in the external environment, including industry trends, technologies, and marketplace developments.  Too often, business leaders focus primarily on what’s occurring inside of their company, with a “they need us” mentality when it comes to customers.  This mindset is one that greatly jeopardizes the future of a company.
  • Resource reckoning.  New business models utilize resources differently; examples include the need for fewer people, different skillsets, roles that are held by technology, and utilizing strategic partnerships.  Each of these bring changes in workflow design, systems, processes, and costs (remember that costs directly impact pricing!).  Companies that do not proactively pursue the need to change how they work tend to get left behind at the worst of times, when more savvy competitors have implemented these methods, making it impossible for others to catch up and compete; which leads to this last point.
  • Financial shortfall.  Integral to a successful business is the ability to generate at least good financial performance (strong results are, of course, better), thereby creating the fuel to invest, grow, and sustain over the long term. When a company does not have the right business model, it isn’t in a position to build the appropriate strategies to utilize resources well and be competitive over the long term, which leads to poor financial results; it’s all connected.  Companies in this situation lack market relevance and are, too often, left without a future.  Think about what this means to a business leader who is depending on the transition of their company to someone else, as the basis to fund their retirement.

The reality is that many of the advancements that we live with today represent technologies that much of society could not have imagined even five years ago.  What will the next five years bring?  The next 10 years?  As technological advancement continues to accelerate, even the next two to three years will be highly significant.  Is your company ready to face this challenge?

Remember that challenge also brings opportunity, but only for those who are well positioned to approach it.  Learn more about the profound impact of disruption in the external environment, as well as how to take control and benefit from it by reading Defusing the Family Business Time Bomb.  The future of any company is based on its ability to continue to be relevant to the marketplace over the long term.  In today’s world, this is anything but a given.

Defusing the Family Business Time Bomb: 4 Important Threats to Understand, Now!

This article was published by CMC-Canada in the Winter, 2019 edition of Consult


The Top 4 Threats to your Family Business in 2019
Many of us are familiar with family business leaders in our community; perhaps, you were raised in this environment or are managing a company yourself.  Family businesses represent a considerable segment of the Canadian economy and have the potential to be unstoppable; where everyone works together to move forward with common purpose.  Family businesses, however, can also be plagued with the conflict and strife that tend to be associated with relationships that are close, personal, and longstanding; this reflects the other side of the coin.  By their very nature, family businesses can be tricky.

There is something more, however, that business leaders need to be concerned about; something that could impact the future of both their company and their family’s wealth, and it is simply this: Family businesses are facing the most explosive challenge in a generation.  The reason?  Seldom have so many potential threats been evident in our external environment, many of which make headlines on a daily basis.  Consider the following:

  • Demographic factors.  Experienced advisors know that the majority of aging business owners do not have a succession plan and research has supported this finding over the years.  They also do not fully appreciate the reality that there are a limited number of potential successors, in terms of those who have the necessary skills, interest, and capital to take over a company.  This fact alone has the potential to halt business transition in its tracks.
  • Disruption of key industries.  The manner in which we live has, and continues, to change.  Consumers and companies procure goods and services differently than in the past, resulting in the need for new and complex business models, many of which are supported by rapid digital and technological advancement.  Companies that do not keep up with marketplace expectations not only face declining demand, but also the risk of obsolescence, in terms of transition to someone else.  This can be a sobering and disappointing reality for many business leaders.
  • Significant change in the global economy.  The daily headlines in our world are often characterized by widespread change, including in areas such as trade, tariffs, political alliances, and business requirements.  This ongoing evolution brings uncertainty, with the potential to significantly impact a company’s planning efforts, financial results, and valuation upon transition.
  • Uncertain financial times.  Recent tax changes in a number of areas have generated many questions from family business leaders, impacting areas such as income distribution and investment opportunities.  When coupled with increasing interest rates, accessing the capital that is so integral to business growth and transition strategies could become increasingly difficult, a challenge that especially impacts young entrepreneurs and potential successors.

Any one of these developments can have a significant impact, but when combined, it could create a situation that is impossible for an unprepared company to overcome.  When these areas are considered in the context of typical family business problems, the stage is set for unprecedented challenge; one that impacts families, companies, and Canada’s business community as a whole.

The reality, however, is that many business leaders are unaware of the degree to which these factors have developed, often as a result of not spending a sufficient amount of time to fully understand the external environment, including industry and market trends and developments.  Since this is clearly a critical time for business leaders and their families, Evelyn Jacks and I decided to write our latest book, Defusing the Family Business Time Bomb.  This isn’t just another “family business book”; rather, it brings a common-sense approach to addressing the many challenges that are associated with building a company that has the potential to be sold to someone else in the future, all during highly uncertain times.

Here’s a final thought: As business leaders in great numbers face retirement, it is only the well managed and strategically positioned companies that will have relevance in the future, enabling them to be transitioned to someone else for a “good to great” level of value.  This stark reality is something that must be recognized by both founders and successors alike.

Escaping the Demographic Trap

Many family business leaders have the expectation that their company will eventually be passed to the next generation and maybe even to the one after that.  Perhaps this is why they established the company in the first place: to provide for the family’s financial needs over the long term, building wealth and security in the process.  Having possession and control of this type of “economic engine” brings with it the power of options and the benefits that are associated with not having to rely on others to earn an income.  Achieving longevity isn’t so easy, however, as research indicates that successful passage of a company to future generations is not typical.

The current environment in which we live is characterized by a number of important realities that impact long term business survival: many companies are led by aging business leaders, most do not have a formal succession plan, and the next generation is getting restless.  Couple this with a backdrop of significant disruption, in terms of technological, economic, political, and social factors and it’s easy to recognize that these days are like no other.

Let’s briefly consider what the current demographic environment means, in the context of family businesses:

  • Business leaders are remaining engaged with their companies for a longer period of time, as traditional retirement has become less of a rite of passage and people are more inclined to lead an active life that includes work.  The other side of this trend includes realities such as needing to work longer to support lifestyle expenditures and indecision around how a company should be transitioned (and family squabbling doesn’t help).
  • Potential successors are seeing little advancement in terms of succession, resulting in the decision to consider other options, beyond that of the family business.  As successors themselves get older, this is understandable, however, it can blindside a founder, leaving them to wonder how their “succession plan” could have gotten away.  This could have serious implications for the future of a company, leaving the business leader to revisit the issue of succession entirely or little in the way of viable transition options.
  • The number of potential successors is limited, in that the next leader is only a realistic option if they have the necessary skills, interest, and capital to undertake a transaction.  This group is further reduced by family members who have moved on to pursue other opportunities, in a demographic group that is already smaller than the generations ahead of it.

When it comes to demographics, you can run, but you can’t hide.  At some point in time, all companies will require new leadership if they are to continue to operate, and the extent to which this can be done successfully is largely dependent on one thing: thoughtful and formal transition planning.  As simple as it might sound, research has shown that the vast majority of business leaders do not do this.

Learn more about the implications of demographics and how you can avoid the “trap” by reading Defusing the Family Business Time Bomb.   Use promo code familybusiness to save on the price of multiple copies, and pay no taxes and shipping costs on all purchases of our book, through January 27, 2019!  The future of your company and family’s income stream will thank you for it.

BOOK RELEASE: Defusing the Family Business Time Bomb

I’m pleased to announce the launch of my new book, Defusing the Family Business Time Bomb!  This isn’t just another family business book.  Why?  Because family businesses are facing the most explosive challenge in a generation.

The reason?  While it is quite normal for a typical family business to be inundated with challenge and change, seldom have so many potential threats been evident:

  • Demographic factors.  The majority of aging Baby Boomer business owners do not have a succession plan and don’t appreciate the reality that there are a limited number of potential successors.
  • Disruption of key industries.  New, complex business models and rapid digital/technological advancement have the potential to reduce valuations and make transition to new ownership either irrelevant or much more costly.
  • Dramatic change in the global economy.  Makes strategic planning difficult, increases competition, and could escalate the cost of doing business, thereby shrinking profit margins.
  • Uncertain financial times.  Complex tax changes, restrictions to family income sprinkling, and a new clawback of the small business deduction all impact profitability, investment opportunities, and access to capital. This challenge could be especially difficult for young entrepreneurs or successors.
  • Typical family business problems.  The conflict, apathy, sudden or emerging illness, or control issues can affect relationships, decision-making and, ultimately, the health of both entities: the family and the company.

Business leaders are under siege, but do they know it?  These issues are significant and very much present in the current business environment, with additional evolution and challenges occurring with each day that passes.

Whether you are a long-time business owner getting ready to transition out or a new entrant to the “gig economy”, poised to grow and expand, you will appreciate this book for its contemporary and practical advice. It brings a common-sense approach to the challenges associated with building a company that has the potential to be sold to someone else in the future. This from two experienced authors and business leaders who have helped the owners, executives, investors, and professional advisors with whom they work to prepare for the most explosive challenge in a generation: the retirement of the Baby Boomers and transition of their companies to a new guard, who face pitfalls and opportunities of their own.

Join me and Evelyn Jacks on this important journey for your business and your family.  Order your copy here!

EVENTS: Coming to a City Near You!

Just about to hit the road on my speaking tour, as part of the Knowledge Bureau CE Summits! This series focuses on year end planning for investors and small businesses, designed for advisors who work with these important clients. I’m looking forward to speaking about challenges that family businesses face in two sessions: The Family Business Time Bomb: Transition, Improve, or Wind up? and a case study discussion, Embracing Disruption and Risk in Succession Planning (yes, you can!).

While it’s typical for a family business to be inundated with challenges and change, seldom have so many potential threats been evident: demographic factors, disruption of key industries, dramatic change in the global economy, and uncertain financial times.  It’s no longer sufficient for leaders to focus their efforts primarily on addressing typical “family business” problems.  Doing so puts the very future of the company and the family’s finances at risk and makes successful transition less likely.

Business owners need to take action now, in order to defuse the ticking time bomb that puts the family’s opportunity for future wealth creation at risk.  Advisors can play a key role in this regard, but only if they bring the value and expertise that business leaders are seeking. Key areas of assistance include the ability to:

  • Work with clients to build value;
  • Develop goals and implement strategies, in terms of business modeling, track record, competitive advantage, and other growth related factors; and
  • Initiate transition planning in a manner that addresses the “time bomb” factors that business owners are facing.

In order to get there, professional service providers need to understand the advisory skillset that business leaders are seeking.  Doing so provides the foundation for differentiation in the marketplace, as well as building a robust advisory firm over the long term.  It’s up to you to ensure that your firm doesn’t get left behind.

Join us for this valuable session by registering here.  See you on the road!

Speaking Tour Day 4: Notes From the Road

We have completed the Western segment of the Distinguished Advisor Workshop (DAW) speaking tour and have met many talented advisors along the way.  As is the case with any session of this nature, the level of value increases when peer learning is part of the process, so your participation is appreciated!

I’ve been sharing thoughts around the topics of business transition and the next generation, as well as business continuity planning.  Some advisors who don’t work in these areas might be asking the question: why should I attend this type of session?  Here are some things to think about:

  • It’s likely that your clients are facing transition related issues, such as business transactions and succession planning.  These areas can require a lot of support to compensate for knowledge gaps, so checking in with clients on a regular basis and getting a sense of what they are up to is an important must for advisors.
  • Although you might not be the one to perform whatever transition related assistance is required, advisors should seek to have a range of skillsets within their professional network, to assist clients when needed.  Advisors that are well connected are in a position to add tremendous value to clients.
  • Those who are not up to date on client needs run the very real risk of being replaced by advisors who do a better job in this regard.  Clients expect more than just completion of the deliverable at hand, and successful advisors know how to ensure that they are providing incremental value.

Advisors can enhance their position by taking the time to understand the issues that their clients are facing, being a supportive, while objective sounding board, and making the right connections when needed.  Raise the likelihood that you are the first call that your clients make, in the comfort that, one way or another, you can help.

Join us at the remaining DAW sessions in Toronto and Ottawa to learn more; you can register here

Speaking Tour Day 3: Notes From the Road

We’ve been out on the Distinguished Advisor Workshop (DAW) speaking tour for a few days now, and have visited Vancouver and Edmonton.  It’s been great to talk to advisors about their own businesses, as well as some of the general situations that arise when working with clients.

I’ve been sharing thoughts around two topic areas: Next Generation Continuity Planning and Building Business Continuity Plans.  Given that so many companies are poised to change hands, now and in the not so distant future, these area critical areas for advisors to understand.  Here are a few thoughts to consider:

  • Transitioning a company from one set of owners to the next (and one set of leaders to the next) is a specialized area; something that most business leaders will encounter only once in their career.  Often times, they lack the knowledge of where to start when considering this important issue.
  • It’s often been said that it’s “lonely at the top”, and this is never more true than when dealing with transition.
  • In the absence of a well developed plan to raise the likelihood of business continuity over the long term, companies face the risk of ceasing to exist; an unfortunate end to what might be a lifetime of work.

Will you be the advisor to answer the call, when a client needs assistance in this area?  Are you ready to answer this important call?  Learn more about our DAW speaking tour here

EVENTS: Speaking Tour (Distinguished Advisor Workshops)

Coming to a city near you!  Join us for the Distinguished Advisor Workshops in Vancouver (May 29th), Edmonton (May 30th), Calgary (May 31st), Winnipeg (June 1st), Toronto (June 5th), and Ottawa (June 6th).

Looking forward to sharing thoughts in the following important areas:

NEXT GENERATION CONTINUITY PLANNING

In this session, you will learn how to prepare your clients who are transitioning their businesses to the next generation of leaders and/or preparing their business for sale. Tax and financial advisors can be of significant help by guiding clients in the direction of formal business continuity planning

Learn how to address key issues your clients should be considering, including:

The transaction “knowledge gap”;

The opportunity to apply innovation to business continuity planning;

How to approach strategic business planning, and the succession transaction itself; and

How to address financial partner considerations.

Things to consider in finalizing the transaction.

The continuity of these companies could depend on your help: and, it’s your opportunity to differentiate your services from others.

BUILDING BUSINESS CONTINUITY PLANS

Every business needs a formal plan throughout its lifecycle, for focused decision making, as well as in preparation for its exit and/or transition.  This session will discuss the sound guidelines that business owners should use to develop such a plan and other value building considerations, including:

Guidelines for developing a well written business continuity plan;

Identifying and articulating your market opportunity;

The relationship between the business model, strategy, and plan;

Key planning components, including products/services, marketing strategy, and operations, and Management;

Guidelines for preparing a financial forecast for three to five years; and

An introduction to the Executive Business Builder Designation Program

Details and registration are located here.

As the lead instructor and author of four certificate courses in the Knowledge Bureau’s Master Financial Advisor (MFA) Designation Program in succession and business planning, and certificate courses in the new Executive Business Builder Designation Program, I look forward to delivering these sessions.  See you on the road!

No Plan for a Succession Plan? 5 Practical tools to get your business on the road to succession planning

thinkstockphotos-186131464

Published by Divestopedia

Every day, business leaders who have been at the helm of their company for many years have fleeting thoughts about what the future might hold.  How long do I want continue to work?  Should I sell my business?  Who could manage my business?  Is it time to make a move?   Perhaps the biggest question may be this: how do I even get started with addressing these questions?

It’s not uncommon for business leaders to meet with their advisors from time to time; to develop their personal post-sale financial plan, establish family trusts, or work through tax planning strategies.  Although all of these are necessary and important tasks, there is often one very important component missing: how to bridge the gap between a post-sale retirement plan and the current state of a company.  In other words, business leaders might be good at planning for life after selling their business, but are not so good at undertaking the succession planning process.   Why is this the case?

One reason could be so simple that it isn’t fully appreciated: many businesses don’t do a very good job of planning, period.  Annual budgets: we don’t need that.  Business planning: too much trouble.  Sales planning: all sales budgets are too inflated to be useful, right?  Technology planning: we just buy the new stuff every few years.  It’s no wonder the succession planning process never gets off the ground.

Here’s the problem with businesses that don’t plan: since planning is a process that is developed through practicing it, these companies don’t have the opportunity to generate competency in this important area.  A disciplined planning process, starting with shorter term and more straightforward plans, such as an annual budget, can help staff members develop the competency to approach more complex initiatives, such as business and succession planning.  What’s more, the corporate history and financial results that are compiled during the process represent an information base that is integral to succession planning.

So, in the spirit of walking before you can run, here are 5 ways to get the planning process started in your company today:

  • Get the right assistance—as with any new task, it can be much easier to design a process and overcome roadblocks by engaging the right advisory expertise. Business advisors that have helped companies work through the annual budgeting or business planning process can provide valuable insight into establishing an appropriate approach and avoiding common pitfalls.  This course of action typically brings far more value to a business than its actual cost, in terms of time savings and identifying best practices for use over the long term.
  • Develop standardized documents—as with any key process, taking the time to develop templates and documents that can be used repeatedly is a much better approach than starting from scratch every time. A standardized budget template, including information to be collected, supporting calculations, assumptions, and financial statements in the proper format can greatly expedite the process and help users become more productive when undertaking a new initiative.
  • Assign roles and responsibilities—the planning process should be the responsibility of all key management team members within a company and not just a task relegated to a particular department. Ensuring that roles are clearly defined and that a number of people are responsible for providing information to be included in the budget, for example, has benefits of at least threefold: better information, planning training across the organization, and enhanced “buy in” of the result.
  • Set (and adhere to) timelines—like any other initiative, the planning process requires formal deadlines that are not simply kicked down the road if they are not met. Planning can sometimes take a backseat to other activities that are considered to be more relevant or immediate, and maintaining this type of attitude will not enable a business to develop the competency that is required to support more complex initiatives, such as succession planning.
  • Keep planning relevant—one of the fundamental mistakes that companies make is failing to keep the planning process top-of-mind, resulting in budgets and other plans becoming quickly irrelevant as soon as they have been developed. It’s critical to ensure that actual results are compared to plan consistently throughout the year (monthly is ideal) and variances investigated and resolved.  It’s no wonder that companies that fail to do this find little value in the planning process.  Even more, striving to meet or beat the plan is the real challenge, so don’t miss out on this valuable opportunity to enhance corporate performance.

Although this might seem like a lot of work, think of it as an investment.  The key is to start today, take a gradual approach, and build planning into your regular business routine.  Doing so will get you one step closer to starting the succession planning process, as well as actually implementing your post-sale financial plan.

Beat the Growth Curve by Enabling (and sustaining) Business Growth

ThinkstockPhotos-180943997

Every once in a while, something magnificent happens.  A company, through no fault of its own, finds itself in a situation of unexpected growth: that uncharacteristically large order, email inquiry from markets afar, or perhaps media coverage that yields a rush of customers.  As enticing as such growth can be, there is an important question that must be carefully considered: can this level of demand be sustained?

It’s easy to find joy in times of success, wanting little more than to sit back and savour the moment.  Having said that, it’s important to not fall into the trap of taking short term growth as a given for the future.  This is a dangerous approach that has been the downfall of many companies, who banked on the money before it arrived and made decisions on this basis, many of which involved outlays of cash.   Too often, the “can’t miss” opportunity is anything but, with the key unanswered question being whether or not the increased level of demand was sustainable or just a bump in the road.   Paired with this is often a lack of appreciation of what’s required to create sustainable growth over the long term.

Business leaders can take matters into their own hands to increase the likelihood of a better outcome, to effectively stay ahead of the growth curve and beat it.  The approach is built upon fundamental, good business practices; here are some tips to get you started:

  • Research always rules—when demand rises, it’s a great opportunity to find out why. This can be achieved by engaging with customers and keeping an eye on the marketplace for developments of interest.  Published research sources, industry associations, and economic analysts can bring information about key trends and how demand could be impacted.  Utilize this information to understand changes in demand for the short and long term and how your business strategy might be impacted.
  • Focus on what makes you special—every business must be able to tangibly articulate why customers should choose them, as opposed to the competition. It’s important to communicate what your company has to offer, not just in the present but also on a sustainable basis.  Focus on areas such as proprietary expertise, products, service levels, and other areas that set you apart.
  • Keep an eye on external developments—which includes emerging trends and happenings in the industry and marketplace where you do business. Look for opportunities to offer new products and services in your area and pay careful attention to changes in consumer preferences.  Too many business leaders focus the majority of their time on internal matters and can quickly find themselves out of step with opportunities in the marketplace, as well as displaced by savvy competitors who didn’t make the same mistake.
  • Accentuate the positive—increased demand can be tempting, in terms of quick decisions to scale up, buy, hire, and other expansion related steps. Conversely, a good strategy is to leverage what you already have and minimize new cost outlays.   Accentuate the positive by building on what you already have; longer business hours, a greater online presence, and making use of existing capacity are all options.  Strategic partnerships can also expand your product offering without significant costs.
  • Build the brand— ideally, it’s important to create an identity that positions your business as the “go to” provider of choice; this is key to sustaining demand for the long term. Most communities have such examples, so utilize your efforts to make your name a recognizable one.

Recognize these efforts for what they are: an investment; to take control and grow on a proactive and prolonged basis, well into the future.  Your business (and your bank account) will thank you for it.