Growing up in a small business environment, watching your parents work harder and harder to make a good life for us as children I believe that my parents probably worked too hard and didn’t give themselves the opportunity to maximize the value of their businesses before retiring.

Succession planning should start earlier, not at age 65 when people retire, but several years before in order to determine an exit strategy which either passes along the family business to the siblings or to get the businesses ready for sale.  In Canada according to a CFIB (Canadian Federation of Independent Business) 70% of small businesses owners will retire in the next 5 years.  That provides 2 business scenarios for small business owners, one, that the businesses will be hopefully passed along to one of their siblings in order to quickly deal with the succession planning issue or two, that there will be a lot of small businesses coming up for sale.

But I believe that one of the biggest hurdles to succession planning is that small business owners who have had businesses for a long period of time actually think of their businesses as being part of the family like another child and there’s the emotional tug of war on deciding to give up the business even to their children if that’s the route they choose.  The more difficult decision is to decide to sell the business to an outsider and that’s probably one of the biggest reasons why people outside the business might view it as procrastination, but to the small business owner it could be more an emotional factor.  My parents were already past retirement age when they decided to sell some of their businesses and hang onto a few others.

This delay hurts both the employees of those businesses as well as the owners in that their is a definite lack of plan of going forward and the owner’s passion has already waned and they’re no longer really interested in running their businesses, but don’t want to necessarily letting go.

These businesses have been profitable but the owners’ have had a hard time taking time away from the day to day running of the business, or taking a step back to look at their business at the 10,000 foot level and trying to setup their business to become saleable at the most attractive price.

A study released late last year by business transition specialists ROCG Americas found only one in 10 owners received a price for their business near what they wanted or expected. The primary reason given was improper or lack of planning.

ROCG conducted the survey in North America and found that businesses with revenues between $1 and 100 million said that they were either too busy to plan for a business sale or it was too early to start thinking about it, even though 84% of them said it was important to their retirement plans.

“Many business owners are not aware of the complexity involved in the succession planning process, particularly in executing a divestiture transaction,” says Michele Middlemore, vice-president of Aon Corp.’s M&A Transaction Advisory Group. “Almost always, they underestimate the time and work and difficulty involved in getting something like that done. More often than not, they tend to postpone dealing with it and are not prepared adequately when the time is upon them.”

Businesses should be planning 2 or 3 years in advance for the divestiture.

One of the big ideas to put in place is the movement of the value of the business is from the business owner to that of the business itself.   Since small business owners are generally the drivers of the business, it’s usually been in the sales and marketing roles and this is one of the areas which has to be transitioned over to the company.  This is easier said than done, in that one quite often that there isn’t the bench strength to take over and this has to be brought into the company.  Their might be changes in technology which might be needed to brought into the company as well to allow to compete better.

One can look at the succession planning in a way is like embarking on a new business plan and here a corporate financial advisor can help with getting an independent valuation of a business to let owners know where the strengths and weaknesses lie and what to expect as a potential starting point for a dollar value of a business sale.

According to the Business Development Bank of Canada, business succession is a process that requires thought, planning and time to arrange and execute: “Whatever your definition of success, making the commitment to let go of the business and place it in the hands of someone else is perhaps the critical factor that ensures your business transition goes smoothly and profitably,” the bank notes.

Just remember though that succession planning shouldn’t be determined by what the economy is doing or the stock markets, but by personal circumstance, if you’re ready to retire, then you should be planning for it in advance by 2 to 3 years.  The process is a complex one and is similar to building a new business plan, except that you’re trying to help build for the next set of owners’ to succeed and by doing so you and your family will get top dollar for your business you have built over the years.

Written by Richard Wong, CMA     rwong@firstchoicecapital.ca

Marketing and advertising is one item you shouldn’t cut from your expenses budget as according to research, companies which continue to promote themselves in downturns do better than their competitors once the economic downturns have subsided.  Here’s a list of 5 ways to promote your organization:

1. Send out promotions with your customer invoices, either electronically, fax, or mail.
2. Create a Facebook page for your company.
3. Give free workshops on your products or services.
4. Create a video for your business and upload it to Youtube.
5. Network in new circles and ask for referrals from your old customers.

What’s important to remember is that it’s still important to promote your organization in tough economic times and if you’re not comfortable doing some of these things then get someone else in your organization to do it.

Written by Richard Wong, CMA   rwong@firstchoicecapital.ca

Cash flow is important anytime, but especially in today’s economic environment of tighter credit.  We know today that the credit crunch has affected the economy and that banks are now able to pick and choose who they extend credit to, how much credit they extend, what conditions they extend it to, and how they can pressure you the CEO, CFO, or owner of the business into improving your financial results to comply the banking arrangements.

Here are 5 hints to Improving Cash Flow:

1. Invoice ASAP & Follow up next day to double check client has received the invoice

• Get in the habit now of invoicing as soon as the job is done and getting it into the hands of the customer electronically, either by fax or email or if handwritten invoices spend the time after delivery to now write the invoice earlier in the day before delivery, rather than “I’ll invoice you later.” Most accounting software from Simply Accounting & QuickBooks to Microsoft Great Plains, Sage ERP, to Oracle and SAP the email invoices feature can simply be turned on.

• Now considered a best practice, be proactive you don’t want to find out 30 days after the invoice date that the customer hasn’t received it.  Customers may find this irritating at first, but you can always tell the customer that you are just trying to ensure they are happy with the product or service they received and that there aren’t any issues with the invoice.  You can say that you’re trying to improve your customer service at this time.

2. Ask for a Retainer or Deposit

• Depending on the industry or whether it’s a new client or old this is one worth trying as if you can get a deposit for goods/services ordered then paid in installments is better than waiting for the payment to come 30 days after the job or product has been delivered.

3. Offer Cash Discounts for Quick Payment

• If you haven’t offered a cash discount for payment within 10 days, ie. 2% 10, net 30 means that the customer gets a 2% discount off the total invoice if  “they pay within 10 days only” or the customer has the standard of paying within 30 days.
• Think of it as a sales discount you’re willing to give to be able to get the money in your hands earlier rather than someone else’s hands.

4. Become a Pit Bull of Receivables (Keep after them!)

• Start reviewing your aged receivables reports weekly if you don’t have a Key Performance Indicator system (KPI’s for short) and seeing if you have late paying customers how late they are get your receivables people to start action right away by either emailing them right away then calling them the next day.  Some customers need to be reminded, that’s why if you’re proactive and invoice right away and follow up to ensure they have received the invoice and processed them you’ll have to do less collections work in the end.
• Why wait, it’s your money?

5. Pay Invoices Only When Due

• Review those vendor contract terms to see when those invoices are actually due for payment rather than paying them right away because you want to get them out of the way.
• Setup online banking payments so you can schedule when payments are due and you are able to download electronic information to your accounting software.

In summary, these are some quick things to implement to improve your cash flow and also at the same time improve your customer service and satisfaction.  Protection of cash should be the CEO’s biggest concern nowadays and any ways to improve the order to cash cycle should be attempted.

Written by Richard Wong, CMA     Email: rwong@firstchoicecapital.ca

“Sometimes we do our best, sometimes we need to do what’s required” Winston Churchill.  Those choice words really apply today, doing what’s required. We have had a great economic run these last several years and for many people doing business was more about taking sales orders and making record profits year over year.

Today though we are back to how business was before the business boom, and that is working harder to keep our clients, working harder to get new clients, keeping a watch on the bottom line, and what we have in our cash flow reserves. What we know is that companies which have good leaders ie. Sergei Brylin (Google), Steve Jobs (Apple), Chip Wilson (Lululemon), have learned to take companies and ideas from past downturn times into the present day with great vision, but even more importantly, greater execution.

Leaders, come out of economic downturns better than anyone else. Why? 5 Qualities distinguish them

1. Have a clear vision
2. Reap what you sow, sow more and you will reap more.
3. Know the difference between a problem finder & a solution provider.
4. Who do you spend the most time with? The 5 people you spend the most time with have the most profound effect on you. Your income is the average of those 5 people.
5. Get good at whatever you practice.

10 Ideas to Lead:

1. Think of loss leaders, 20% of all your customers provide 80% of your revenue, therefore you can give away more freebies to help you get more revenue from your best clients.
2. Go beyond the call of duty: Example. You need to have your shoes shined before a early morning presentation but its late at night and the hotel doesn’t have a shoe shine station or anyone who can do it. What does the hotel manager do, he gets someone before the presentation starts to shine the presenter’s shoes from outside the hotel.
3. Look within your own organization to give away something for free that doesn’t cost you anything.
4. Think about joining hands with other groups to do business with to save costs.
5. Keep staff productive ie. Bob Rennie of Rennie Marketing gives his employees Friday afternoons off because he thinks they’ll be more productive and fresh thinking because he can’t pay the same amount of bonuses this year compared to last year.
6. Think of how important your value is to of consumers and communicate it with staff and customers.
7. Shopping centers provide a great opportunity for businesses to get good value for upcoming leases.
8. Try to be a FAD (Feelings, Attitudes, Distinction) should be taken into account in your decisions of your customers.
9. Goals written increase the likelihood by 1000 times of those goals being achieved. The top 3% write goals, the top 2% write goals as if they’ve already reached the goal.
10. Continue branding and marketing

Organizations are now required to going back to doing the basics and they can endure hard times by doing what’s necessary. A Booz Allen Hamilton study on how organizations endure over time led to their findings showing that:

1. Organizations changed and grew.
2. Organizations stayed true to its founding principles

The message today is work hard, be the best that you can be, don’t take yourself or your customers for granted, and be proactive to lead your organization into the future out of this economic downturn.  Be Bold and be a leader!

Check out this  video on being bold.  http://www.odpn.ca/demand/videos