Friday, October 25, 2013

Smart Business Owners Share a Common Goal

Are you on track to meet your business goals for 2013?  What are your goals for 2014?  How often do you actually write down your goals for the coming year? 
I find that business owners generally do have predetermined revenue and/or profit targets.  While those are important, there is another goal that can have an even bigger payoff: building a sellable business.
You may say that you are not ready to sell.  That’s not relevant.  Here are five reasons why building a sellable business should be your most important goal, regardless of when you plan to exit your business:

1.  Sellability means freedom
A fundamental factor for determining sellability is how well your company would perform if you were unable to work for a while.  As long as your business is dependent on you personally, there is not much to sell.  Making your company less dependent on you by building a management team and creating policies and procedures for employees to follow means you have the ability to spend time away from your business.  Think of the world of possibilities that would open up if you could choose not to go into the office tomorrow.

2.  Sellable businesses are more fun
Running a business would be fun if you were able to spend your days on strategic thinking and big picture ideas.  Instead, most business owners spend the majority of their day on the details: the government forms, the employee performance reviews, bank reconciliations, customer issues, auditing expenses, etc.  The boring details of company ownership take the enjoyment out of owning a business.  It is exactly these tasks you need to get into someone else’s job description if you’re ever going to sell.

3.  Sellability is financial freedom
Do you check your brokerage statement each month to see how your portfolio is doing?  You’re not necessarily looking to sell your portfolio but, you want to know where you stand on the journey to financial freedom.  Creating a sellable business also allows you peace of mind, knowing that you’re building something that, just like your stock portfolio, has value that you could one day monetize.  You can monitor your progress with periodic business valuations prepared by an independent business valuator.

4.  Sellability is a gift
Imagine that your child has just graduated from college.  As a gift you give him your prized 1967 Shelby Ford Mustang.  Your heavily indebted child takes it on the road, but after a few miles, the engine starts smoking.  The mechanic takes one look under the hood and declares that the engine needs a rebuild.
You thought you were giving your child an incredible asset, but instead it’s an expensive liability he can’t afford to keep, and nor can he sell it without feeling guilty.
You may be planning to pass your business on to your kids or let your young managers buy into your company over time.  These are both admirable exit options, but if your business is too dependent on you, and it hasn’t been tuned up to run without you, you may be passing along a lemon.

5.  Nine women can’t make a baby in one month
There are some things in life that take time, no matter how much you want to rush them.  Making your business sellable often requires significant changes.  A prospective buyer is going to want to see how your business has performed for the three years after you have made the changes required to make your business sellable.  As a result, if you want to sell in five years, you need to start making your business sellable now so the changes have time to gestate.
To find out how sellable your company currently is and what you need to tweak to improve its sellability, take the Sellability Score via the questionnaire on our website.  You can complete the questionnaire here
To learn more about our VSP Exit Starter Program or to find out the value of your business, contact us at www.vspltdca.

Wednesday, October 16, 2013

Do Not Forget Insurance When Planning Your Exit

All business owners will one day exit their business – voluntarily or involuntarily.  Insurance is a vital tool for ensuring you are prepared for an involuntary exit due to death or disability. 
Two of our recent files at VSP involved a shareholder death.  Our valuation expertise was required in connection with a buyout of the surviving spouse’s equity interest.  Thankfully life insurance was in place to provide income replacement for the surviving family members and for purposes of funding the buyout.
Life insurance, disability insurance, critical illness and long-term care should be considered to ensure you are prepared for an involuntary exit due to death or disability.  As a business owner, do you have sufficient life insurance in place?  Does your insurance provider have the knowledge and experience to deal with the various tax and other issues relevant to business owners?

I recently sat down with Cory Budovitch from Independent Financial Concepts Group ( in Toronto, Ontario.  Cory has over two decades of experience working with business owners and incorporated professionals on insurance and exit planning issues.  Cory is also a member of the Million Dollar Roundtable, an international, independent association of less than 1 percent of the world’s life insurance and financial services professionals who demonstrate exceptional professional knowledge, strict ethical conduct and outstanding client service
I know that Cory takes great pride in his process and in developing a personal relationship with each and every one of his clients.  I was interested in Cory’s thoughts on the top four things a business owner should be aware of when it comes to using an insurance professional throughout the exit planning process.  According to Cory, an effective insurance professional should:
  1. understand the process – your insurance professional should take the time to understand your current situation and your goals (personal, family and business).  He/she should walk you through the process in an intelligible fashion answering any questions you have along the way so you understand what to expect;
  2. consider all options – your insurance professional should identify all of your options and work with you to ensure you make the best decision for you and your family.  Options may include: where to hold the insurance policy; what investment vehicles to use; and where and when to withdraw money and how it will be taxed;
  3. put you first – your insurance professional should invest the time to understand you and put your needs and interests above all else.  He/she should have a long-term outlook and be willing to walk you through the process at your pace.  Being able to come up with creative solutions to your issues that will not put you at risk is also extremely important; and
  4. conduct regular reviews – you should review the type of insurance and coverage with your insurance advisor at least annually.  Has your business increased in value?  Have you acquired a secondary residence, gone through a divorce, had a death in the family, had a new child or had a change in your health status?  If so, your insurance needs may have changed.
In addition to the above, Cory routinely collaborates with other professional advisors (e.g. accountant, tax & estate lawyer, business valuators, actuaries, etc.) as part of a business owner’s exit planning process.  According to Cory, "It is vital to have an insurance professional that can work well with other professionals.  Effective communication with the other professionals, especially the accountant, is critical to understanding how a particular strategy will ensure the business owner’s goals are met."
My time with Cory was very interesting.  Not only does Cory have the knowledge and experience to ensure business owners are prepared for an involuntary exit due to death or disability, but he also helps business owners extract money from their companies while reducing their taxes and earning a measurable return on their investments.
If you are looking for an insurance professional or want a second opinion on your insurance needs you can contact Cory at  Relationship, integrity and trust are extremely important to Cory.  He is fully committed to his process and will take the time needed to understand you and your situation.
To determine if your current coverage is sufficient a business valuation may be required.  To find out the value of your business or to learn more about our VSP Exit Starter Program, contact us at

Monday, October 07, 2013

Take a Picture of Your Business to Enhance its Value!

A few weeks ago a friend of mine was telling me about a new exercise routine he had been following to help him lose weight and improve his overall health.  It was visually apparent to me that he had achieved success with this new program.  When he showed me his progression through weekly photos of himself, however, I immediately bought into his exercise routine as well as his commitment and motivation to its success.  
More recently, my brother sent me a current photo of himself and one from one month earlier.  He is currently training for a competition and I wanted to see his progress to date.  He has bodyweight and bodyfat targets to hit and he hired a physique coach to help him develop an exercise and diet routine.  After one month, the improvement is noticeable but admittedly he has more work to do to meet his goals.  The pictures, he tells me, help keep him motivated and committed to his exercise and diet routine.  They also help him assess his progress to date and identify what areas need further improvement.
That’s when it hit me.  Business owners that want to increase the value of their business can learn from this approach.  If you want to improve the value your business, you should take its picture at regular intervals.
Taking a picture of your business, by having an independent business valuation, will help you monitor the progress of your business and motivate you to focus on the tasks required to achieve your goals.  If you want to attract multiple purchasers when it comes time to sell your business and receive top dollar, taking pictures of your business will also strengthen your credibility in the eyes of potential purchasers.
Audited (or reviewed) financial statements provide credibility to a certain degree but they only speak to the company’s historical financial results.  A growth plan (with financial projections) and a business valuation reflect the future of the business which is critical to potential purchasers because value is based on future cash flows.
Have you ever wondered why before and after photos are so effective at selling a diet or exercise routine?  Have you ever been tempted to buy a diet book, exercise program or nutrition plan based on the before and after photo testimonials?
Just as you can monitor your individual progress on a diet or exercise routine by taking periodic photos of yourself, you can monitor the progress of your business by having an independent business valuation conducted at regular intervals.

Just as taking pictures of yourself helps with your motivation and commitment to a routine, obtaining annual independent business valuations will keep you motivated and committed to the implementation of your value enhancement action plan. 
And finally, just as before and after photos add credibility to your diet or exercise program, periodic independent business valuations will add credibility to your growth and value enhancement plans.
I will be keeping tabs on my friend and my brother in the coming weeks.  Success is contagious and their success to date is motivating me to reassess my own diet and exercise routines.  Wish me luck!
If you want to take a picture of your business by having an independent business valuation, contact me at  If you have any questions regarding the exit planning process in general or want to learn more about our VSP Exit Starter Program, contact us at

Wednesday, October 02, 2013

Why You Should Discuss Exit Planning With Your Accountant

According to a Canadian Federation of Independent Business (CFIB) study, nearly two thirds of companies consider their accountant (and lawyer) the most valuable source of information. [1]
In 2009, the CEO of the Canadian Association of Family Enterprise (CAFE), Lawrence Barns, was quoted as saying "When family businesses are asked who their most trusted adviser is, 73% say it is their accountant." [1]  
Does this include you?  Is your accountant your most trusted advisor?  Is he/she aware of when and how you plan to exit your business?  When you meet with your accountant to review the annual financial statements and corporate income tax returns, does the topic of exit, succession or business transition come up?  It should!  Your accountant should be an integral member of your exit planning team and must be involved throughout the process from beginning to end.
I recently sat down with Jeff Ambrose, CPA, CA, Partner with HSM LLP ( and Principal with Valuation Support Partners Ltd. ( in Markham, Ontario.  Jeff has over 25 years experience in consulting with companies on accounting, financing, sales and acquisitions, profit growth, marketing, business management, corporate structuring, business valuations, business modeling and income taxes.  Jeff is actively involved in developing estate and succession planning solutions for owner managed businesses.  I have had the opportunity to work closely with Jeff and see how much his clients trust him and value his advice.  He truly is the most trusted advisor to many of his clients. 
According to Jeff, from an exit planning perspective, the top 4 things business owners should regularly discuss with their accountant are as follows:
  1. Tax Planning Advice – tax planning is something that should be done early in the exit planning process.  If one of your goals is to minimize income taxes on the eventual sale of your business your accountant can help you determine and implement the appropriate strategies (i.e. estate planning, family trusts, capital gains exemption qualification, corporate-owned life insurance, etc.).    
  2. Business and Succession Plan Preparation – in order to be attractive to potential purchasers you must have a concise business plan with financial projections that clearly show how the company will address its weaknesses/threats and exploit its strengths/opportunities to deliver future growth.  As part of the plan, or as a separate plan, the owner must identify the most likely exit strategy and what is required to get there.  With financial acumen and intimate knowledge of your business, your accountant is uniquely qualified to assist with this.
  3. Financial Statement Preparation – if you plan to sell your business within the next 5 years, potential buyers will want to see that you have reviewed or audited financial statements (as opposed to a notice to reader).  This will help streamline the due diligence process and increase your odds of getting a deal done.  You should find out if your accountant is willing and able to provide reviewed or audited financial statements.
  4. Pre-Sale Diligence Binder – if you are serious about selling your business on the open market and attracting a premium price, a pre-sale due diligence binder will be invaluable.  Your accountant can help you build this binder and keep it current to help streamline the due diligence process and increase your odds of getting a deal done. For more on building the pre-sale diligence binder,

These items should be discussed regularly because exit planning is a dynamic process and not a one-time quick fix solution.  As an accountant and business valuator, Jeff routinely has exit planning conversations with his clients.  He works closely with his clients and other professionals (including lawyers, insurance professionals, bankers, family business advisors, etc.), on issues surrounding exit planning to ensure his client’s goals and objectives will be met.  According to Jeff, what is most important in the process, however, is documentation. Without proper documentation some of the best plans fail.

My time with Jeff was very informative.  It seems to me that your accountant should be a critical member of your exit planning advisor team from beginning to end.  If you want to minimize taxes, maximize net proceeds and protect your family’s wealth you need an accountant with exit planning experience that you trust.  Whether you are planning an internal transfer or an external sale, you will need to consult your accountant on issues surrounding your financial statements, tax and estate planning, business plan preparation, business acquisitions and sales and pre-sale due diligence preparation.
For more information on how an accountant and business valuator can help with your exit planning efforts, contact Jeff at or  If you have questions regarding the exit planning process in general or want to learn more about our VSP Exit Starter Program, contact us at
[1]  Source: Ten Ways To Add Value, CA Magazine, August 2009.