Staring it Down: The Family Business Time Bomb Meets COVID-19

Blog Post published by Evelyn Jacks of Knowledge Bureau

We couldn’t have predicted the devastating economic effects of the pandemic on small businesses when we wrote the book, Defusing the Family Business Time Bomb.  But if there was ever a time for families to address the issue of what to do next in guiding their business out of stormy waters, it’s now. This is the book to help you and your clients through it. Here’s how my co-author, Jenifer Bartman describes the opportunity:

“Remember all of those times when you thought (or your clients thought) that something that happens on the other side of the world can’t impact your company? The current COVID-19 crisis is a case in point that demonstrates that the exact opposite is true. While business leaders are challenged to manage their companies, determine if they qualify for relief programs, or simply survive, many are likely realizing that their systems, processes, and financial information need to be much stronger.  Strategies to implement now and carry into the future are in demand and Defusing the Family Business Time Bomb was written to stare down challenges and win, even when we can’t always predict what the specific circumstances might be.”

It is clear the critical questions have intensified.  What should owner-managers do now with the family business, mid-pandemic, and at a time when boomers are contemplating retirement? Will the business sell for the millions owners hope for, limp into bankruptcy, or just wind down?  Worse still, will family relationships survive it all?

The answer lies in the family’s ability to embrace these unprecedented changes to re-imagine the purpose of the business beyond the pandemic, and then to drive that renewed purpose to build and transition a scalable company that has value beyond the original owner.

But at the same time, it is important to focus on the family relationships that will either suffer or thrive along the way. The reason? Even more damaging than the economic fallout of the pandemic is that the most promising and profitable company could perish when the investment in the family business is marred by family conflict.

While it is normal for a typical family business to be inundated with challenge and change, we all know these are not normal times. Never have so many potential threats been evident at the same time:

  • The disruption of the pandemic: While some “re-imagined” companies will enjoy a successful rebirth in these times, many may not survive.  It is critical that a Real Wealth Management™ team of specialists be engaged to do a 360-degree analysis of the short and long term “what if” factors.  The family needs to understand tax, legal and financial circumstances and plan proactively to get through them.
  • Demographic factors: aging Baby Boomer owners have a limited number of potential successors, and now a shorter runway to revamp valuations within the tepid economic growth cycle they find themselves in.
  • Disruption of key industries: new and complex business models require a rapid pivot. It’s all virtual all the time, and like the internet and computer revolution before that, working from home and conducting Zoom meetings will not fade away. This is the mainstream way to conduct business and it is here to stay.  The unprecedented speed that digital/technological advancement has been forced upon the globe requires an enormous rebuild for many businesses. This could reduce expected valuations and make transition to new owners either irrelevant or much more costly.
  • Dramatic change in the global economy: There is no doubt that the recession Canada now finds itself in is making strategic planning more In good times, the big worry is the escalation of the cost of doing business and shrinking profit margins.  In these bad times, the enemy is the absence of revenue. It requires the remaking and repositioning of the value of the company in completely new pursuit, as forecasts will likely be more important than historical trends. Astute professional help from experienced accounting and business valuation specialists can save exit expectations.
  • Uncertain tax rules: There is no doubt that the complex new 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 who want to scale up the business for the future. However, the various wage and rent subsidy programs have been complex. They have tax implications and more importantly, bring with them a higher probability of tax audit risk in multiple departments:  GST/HST, payroll and personal/corporate income tax.
  • Typical family business problems: 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. Exhausted business owners who have been working overtime just to hang on and meet their obligations are likely not endearing themselves to the families that resent their efforts to save the business.

Whether you or your clients are long-time business owners getting ready to transition out, or a sudden new entrant to the “gig economy” due to pandemic-induced unemployment, the good news is that you are likely poised to grow and expand, once the dust settles. You will appreciate this book for its contemporary and practical advice on how to get the next phase write, from the ground floor up.

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, despite the current crisis.

I know I speak with my co-author, Jenifer as I say this: we wrote Defusing the Family Business Time Bomb to help prepare for the most explosive challenge in a generation. Specifically,  the retirement of the Baby Boomers and transition of their companies to a new guard, who face pitfalls and opportunities of their own, most especially now. We hope you will order it, gift it to your business owner friends and clients, and start numerous new discussions about the bright economic future ahead, once we get past these storm clouds.

Jenifer Bartman, CPA, CA, CMC, MFA™, is the Founder and Principal of Jenifer Bartman Business Advisory Services, assisting companies in transition (early, financing, growth, and succession stages) with growth strategies, financing readiness, strategic/business planning, and executive coaching. Jenifer is well known for her venture capital and early stage financing expertise, having been an executive in the industry and an advisor to many young companies. She appears on the CBC News Network Weekend Business Panel. She tweets @JeniferInc.

Evelyn Jacks, MFA™, DFA-Tax Services Specialist™, is one of Canada’s most prolific financial authors, having penned over 50 books on personal tax and family wealth management, many of them bestsellers. A well-known tax and financial commentator, she has twice been named one of Canada’s Top 25 Women of Influence. Evelyn is also President of Knowledge Bureau, a national educational institute focused on professional development of tax and financial advisors. Follow her on twitter @evelynjacks, and here in Knowledge Bureau Report.

Copies may be reserved online, or by calling 1.866.953.4769.

MEDIA: Will COVID19 Change the Way We Do Business in the Future? (CJAD 800 AM)

Pleased to join Natasha Hall of CJAD 800 AM radio (Montreal) to discuss recent COVID19 developments and how it might change the way we do business in the future.  As business leaders and their staff members scramble to deal with the current challenge, it is an interesting question to consider what this experience might mean for the future.  Will work ever be the same again, or is the world of business forever changed?

Consider a few simple examples:

  • The “office job”, could lend itself well to working on a remote basis; but is it that simple?  Anyone who has managed a staff group remotely, such as in a different geographic location, can appreciate just how much this differs from managing a team that is under the same roof.  What are some areas that need to be addressed in order to do this effectively?
  • The “service job”, which could include a wide range of companies, such as wellness, food, and household services.  Many of these require interaction on a personal level, such as visiting a hair stylist, repair shop, or tailor, but will these companies face higher standards in the future, such as in terms of cleanliness and service delivery guidelines?  How will this impact how a business is managed?
  • The “user experience”, such as transportation, hospitality, and events.  Most of us are familiar with what it’s like to travel on a crowded plane, train, or bus or to spend time in a restaurant, hotel, or entertainment venue.  Will “personal space” or cleaning requirements change?  What could this mean for a company’s cost structure and viability going forward?

There are certainly some interesting areas to consider, that meet at the intersection of a company, its management, and customer/client base.  Given the experience of COVID19, it stands to reason that there will be an additional factor that could play a significant role: the notion of space, designed to protect people from that which could hurt them.  In this case, it’s protection from a global virus without a cure, one that has kept people isolated worldwide for weeks, months, maybe longer.

So, will COVID19 change the way that we do business in the future?  You can listen to our conversation here; with my thanks to Natasha Hall!

MEDIA: CBC News Network Weekend Business Panel (February, 2020)

Great day to be in studio for the CBC News Network Weekend Business Panel, alongside John Northcott and Mark Warner, discussing two stories that have been significantly impacting companies: the rail blockades in in protest of the Coastal GasLink pipeline and coronavirus.  What’s interesting about these stories, from a business perspective, is that they are good examples of situations that companies would not have expected to occur, but which could bring significant impact.

Disruption to Canada’s rail service can impact logistics across the country and beyond.  Companies that rely on rail service to bring in raw materials and/or ship products to customers can be impacted at the very heart of their business: money.  The inability to receive materials to manufacture products (or deliver services) or an inability to fulfill orders means that sales are not generated.  As simplistic as this sounds, consider what business leaders are left to do in the absence of cashflow, including issuing delay notices to customers and layoffs to staff members.  These may be short term implications, however, long term impacts could include a loss of reputation, customers, employees, and competitive position, and when a company sits idle for any period of time, the lost capacity can never be recouped.

Coronavirus is impacting companies globally, across a wide range of industries, including transportation, hospitality/tourism, agriculture, retail, and essentially any company that is trying to advance its business within the geographic area(s) where the virus is most widespread: currently, China.  Whether a company is impacted due to cancellations and travel advisories or by virtue of decreased demand, it still translates into revenue loss, some of which may have been counted as “sold” before the sale actually occurred (something that tends to happen in the routine of business, or due to the enthusiasm of “counting chickens before they have hatched”).  Delays associated with shipments out of China can leave companies abroad scrambling for stock and materials that are integral to manufacturing products and generating sales.

In what can be characterized as a confusing, vicious circle, what are business leaders to do?  Companies that have planned for disruption in their supply chain and distribution channels may be much further ahead, in terms of identifying alternate suppliers and routes; these are not areas to be researched in times of crisis.  The need for business continuity is an example of why identifying various paths forward in advance is so critical, especially to the key aspects of a company’s operations.  Although doing so may not fully resolve every issue, it helps to mitigate the risk and damage that can occur, something that is particularly valuable in times of prolonged disruption.

Business leaders do not always have the time and skillset to work through this important contingency planning, so it is important to remember that advisors can help; it might just be one of the best investments that a company can make.

We will be monitoring these stories in the coming days and weeks.  Thanks for watching and see you again soon, CBC!

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: Speaking at the Business Builder Retreat

Pleased to announce that I will be speaking at the Business Builder Retreat in Quebec City this November, with tips to rethink your strategic plan, given the unique challenges and opportunities associated with the “new economy”.  Business leaders are facing the most robust macro-level dynamics in a generation, in terms of technological advancement, industry disruption, economic change, and financial uncertainty: are you ready?

The Business Builder Retreat is designed for growth oriented business leaders.  Experience a unique educational event designed especially for business owners on an exponential growth path. Explore topics critical to your leadership development, with a network of business owners from across Canada who understand the challenges you meet daily, competing in a world awash with unprecedented change. The focus is equally on healthy living priorities and the strategic business decisions required to prepare your company, and the stakeholders around it, for opportunities in today’s new economy. Take 24 important hours to refresh and refocus and get more of the personal and business results that you seek.

Details and registration are here.  See you at the Retreat!

MEDIA: Appearance on SET for Success (680 CJOB Radio)

Pleased to have appeared on SET for Success on 680 CJOB with Richard Lannon to discuss some important areas that business leaders need to address to successfully grow and develop their companies.  Being a market leader is a goal for many, but in order to realize a company’s full potential, it’s critical to identify what that means for your business and then develop and successfully implement the plan.  This process is one that is fraught with challenges, but having the right assistance could made success much more likely, to the benefit of your company.

As a business advisor, my approach is to bring a holistic perspective, recognizing that all functional areas within a company are related and impact one another.  For a company to grow on a sustainable basis, all functional areas must be operating well, to provide the foundation for building capacity and sound operations.  Those who do this well are in a position to become market leaders, representing the choice of investors, strategic partners, high calibre employees, and customers.  Those who take a piecemeal approach tend to end up frustrated, wondering why their results are not better.

When companies are growing (or planning to do so), they must also recognize that capital is an important component; this is something that business leaders tend to discover too late.  As a former venture capitalist still active in the industry, the vast majority of business plans that I see are not investor ready; this is the case at least 95% of the time.  Investor readiness involves understanding the expectations of financial partners and investors, which differ significantly from where business leaders tend to focus their efforts.

Advisors could be helpful in a range of areas, including assisting companies with investor readiness and developing strategies for growth and implementation.  As important as planning is, the most significant failures could occur during the implementation process, which is another lesson that business leaders tend to learn too late.  If the objective is to generate sustainable growth and build value in a company so it could be transitioned to someone else in the future, market leaders would not attempt to do so without sound advice.

You can listen to our conversation hereContact us to learn more about taking the next steps in growth for your company.

HAPPENING NOW: Book News

The summer months are a great time for writing and I’m pleased to announce that I have a new book project in development.  As I celebrate 10 years as an independent business advisor, it’s important to continue sharing knowledge with the goal of helping leaders to identify strategies to build stronger companies and is consistent with my previous books, courses, and the many articles that I have published over the years.

In my travels, I see various “leadership” resources; however, many lack practical tools that could be readily implemented to generate meaningful results, while others bring little in the way of direct business experience.  To each their own, however, I prefer to focus on fundamental actions that business leaders could take to build value in their companies, while filtering out areas that detract from doing so.  As an executive, I’ve had a direct role in launching, growing, and transitioning companies, which is a very different type of experience than the norm (if you’ve done it, you will know what I mean).  Focusing on strategies that get results and having a resource who has been in the trench is an approach that can move companies forward more effectively and this has never been more important than in today’s new economy.

I have a theory that companies find reasons to opt out of what is in their own best interest.  Take a moment and think about what that means.  Those who resist this temptation, and instead, face the challenge of building a better business head on, represent the relative few who are positioned for market leadership.  This is a powerful mindset and ability, representing the companies that are the choice of strategic partners, investors, successors, and of course, customers.  With the right strategies and assistance, this could be your company.

I hope that everyone has an enjoyable and successful summer.  Stay tuned for book publication and release details coming soon.

MEDIA FEATURE: Consultants Who Love Consulting

I’m pleased to be featured in the April issue of Consult, a publication of CMC-Canada in the Consultants Who Love Consulting section.

First things first, what is a CMC?  The Certified Management Consultant (CMC) designation is the profession’s only international certification mark, recognized in over 40 countries internationally.  It represents a commitment to the highest standards of consulting and adherence to the ethical standards of the profession.  I have held my CMC designation since 1997 and have found that it separates professional consultants from those who represent themselves as consultants or advisors, perhaps by way of having knowledge in a particular area, but without formal education in terms of the consulting process (yes, there is a consulting process, and utilizing this knowledge makes a significant difference to client engagements).  You can learn more about the CMC designation here.

So, now, here’s a bit more about my personal interest in consulting.

Early in my career, I knew that a “narrow” path of focus wasn’t for me, as I had (and continue to have) an innate curiosity about the holistic workings of a business, in terms of how all of its parts are interconnected.  Like a sports team on their field of play, success isn’t likely without the coordinated effort of all members, working in the same direction.  Too often, organizations seek “quick fixes” in a particular area, such as marketing, and wonder why their efforts are not successful and fail to achieve the desired results.  Simply put, marketing isn’t just about what goes on in the Marketing Department.

I also found myself much more interested in tangible outcomes; action that could be taken to make a company successful, as opposed to just wandering along an undefined path.  The ability to do this is tremendously powerful and separates an advisor such as myself from those who spend their time in more theoretical or long term oriented areas.  There is nothing wrong with these perspectives; they serve a different purpose.

Not surprisingly, I spent almost 10 years as an executive in the fast-paced venture capital industry, where getting things done and generating results were daily priorities.  I believe that bringing this type of experience to client companies can create a competitive edge in the marketplace, BUT, business leaders have to actually want to make it happen.  Doing so isn’t for the faint of heart, as real progress isn’t always easy and the commitment to persevere often takes much more than anticipated.   These leaders, however, know that there isn’t another option, as they are not the type to continue on their existing, less than ideal path, ignoring the obvious signs that charting a new course is needed.

Bottom line, I believe that being in business is all about opportunities, and it’s up to business leaders to make the most of them.  Those who are driven to do so wouldn’t take these steps without sound advice, from those who have “been there”, “done that”, and truly understand the tremendous opportunities and challenges that are at stake.

As a CMC, I wouldn’t have it any other way.  Anything less is, well, less.

NEWS: Executive Business Builder Program Now Available!

As the lead instructor, I’m pleased to announce that the Executive Business Builder Program is now available!

This program is designed to help business leaders build a future-ready company, including building value and best practices, through courses, mentorship, and access to a powerful network of inspirational, like-minded people.  Learn practical strategies for building a company that can generate solid performance and be positioned for transfer to someone else in the future.  Value doesn’t just happen, and leaders need to take tangible steps to enhance their company.

The first course, Strategic Business Planning, is already available, and additional courses are already in development.  Don’t miss out on this opportunity to move from business leader to business builder!

NEWS: Strategic Business Planning Course Now Available!

I’m pleased to announce the launch of my new Strategic Business Planning Course, the first course in the new Executive Business Builder Program at The Knowledge Bureau.

It might be news to a lot of CEO’s and entrepreneurs that most business plans are not prepared very well.  Although a company’s management might find the plan useful, they tend to fall well short of what external parties, such as potential financial partners, require in order to make a financing or investment decision.  This course provides sound business planning guidelines for both internal and external use, putting leaders in a better position to pursue the necessary capital to support the next level of growth.

Getting it right involves developing a thorough and complete business model, strategy, and plan (including a financial forecast), as well as preparing to make the approach to potential financial partners.  Gain insight into a range of important areas, from the perspective of a former investor, including:

  • The key sections of a business plan and what should be included
  • What to consider when building a business model
  • How to identify and select a target market(s)
  • How to select and position products and services
  • Guidelines for developing a marketing strategy
  • Developing an organizational structure, including identifying key roles
  • Guidelines for preparing a financial forecast, including assumptions
  • The perspective of external parties, such as financial partners
  • Guidelines for approaching financial partners

Details and registration are available here.  Stay tuned for additional courses in the Executive Business Builder Program!