Good lawyers get up close and personal with family businesses

JACOLINE LOEWEN, CONTRIBUTED TO THE GLOBE AND MAIL

David Simpson knows all too well the tough battles that need to be fought to successfully transition a family business. He has worked with many of Canada's leading family businesses and he has worked in one himself, with his brother. He now teaches the next generation of entrepreneurs at the Richard Ivey School of Business MBA program in London, Ont

He also knows the important role played by lawyers.

"When talking about transition success, your long-time lawyer may not let you in on a little secret," says the founder of the Ivey Business Families Centre. "The lawyer may not ask if you realize that the legal documentation of your transition or success strategy is the easiest part of the succession process."

Is Mr. Simpson implying that family business lawyers have it easy? Not at all.

A family firm lawyer will know the law, but a good lawyer will also get to know the family very intimately and how the members interact. This close and frequently personal relationship brings its own set of challenges, often requiring a lawyer to step outside of the legal box. The lawyer is like a ring master, advising the owner on when to call in experts to deal with various non-legal family issues encountered when running a business and balancing the long-term succession planning.

"The toughest part of transition is asking three key questions, which have nothing to do with the law or the business itself, but they will challenge every family business," Mr. Simpson says.

His questions are as follows:

·       Does your family speak the same language? A successful transition requires a common frame of reference, and even the simplest everyday terms such as “soon” – as in we’ll meet soon on that – or “long term” can mean different things to each family member. A daughter might ask to run a philanthropy event, but when the founder says ‘we can do it later,’ it means next year. Meanwhile, the daughter thinks her father means next month and conflict arises. It is critically important to meet together as a family to work out common frames of reference to avoid misinterpretations within the family, which can then spill over and confuse staff, customers and other stakeholders.

·       Are the children dependent on the business? While children are growing up, they are dependent on their parents. When the business relationship is added to the family dynamic, it can be emotionally difficult for adult children. They have to be at peace with working for a parent while competing with their parents’ legacy goals for the other “baby” in the family: the family business. Children need to realize that their livelihood may not come from the family business if their skills are not a good fit with the requirements of the industry. Author and family business adviser David Bork said it best: “The purpose of family is to raise responsible adults, who have high self-esteem and can function independently in the world – acceptance is unconditional.” Now compare that unconditional love with Mr. Bork’s description of the uncompromising world of business: “The purpose of business is to generate profits! Acceptance is based on skills, competence, the ability to produce and perform.”

·       Have you discussed personal goals within the family? It is critical for the leader who is passing the torch to not snare the next generation in a trap. There can often be a conflict between the founder and his vision of how the legacy will continue and the next generation’s goals. For example, the younger generation might want to move marketing efforts online and use Google Adwords, Facebook and Twitter. The founder says, “What’s this Facebook – it’s for teenagers?” or “I don’t want to tweet,” and puts a kibosh on the plan. To pass the torch to a new generation, a founder needs to grant full freedom. Great families honour the founding entrepreneurs and understand stewardship of family assets, but they are also mindful that success lies in allowing the next generation to remain entrepreneurs. This means providing the new leadership with the fullest autonomy to take the business in new directions.

ICD SWO Chapter's Annual Social with Professor David Beatty C.M., O.B.E., F.ICD, CFA

Join us for the ICD SWO Chapter's Annual Social on Thursday, May 25th, featuring guest speaker Professor David Beatty C.M., O.B.E., F.ICD, CFA. With 40 different boards of directors under his belt, 9 of them as Chair of public companies, David is one of the most experienced Canadian directors and educators. He helped create the Canadian Directors' Education Program with the Institute of Corporate Directors (ICD) and Rotman, and will share his unique perspective on directorship with attendees.

The event will take place at Cambridge Golf & Country, providing the perfect setting for networking and learning from one of Canada's most renowned corporate governance experts. As a valued ICD SWO member, this event is complimentary for you (RSVP required). Interested new members are also welcome!

Registration opens at 4:00 PM on April 5th, and opening remarks will begin at 4:30 PM. The speaking portion of the event will be livestreamed for those attending virtually. You may view the full agenda on the event webpage.

This is a fantastic opportunity to connect with other like-minded business professionals, learn from an experienced director, and have some fun. Don't miss out! Visit the website to register for the ICD SWO Chapter's Annual Social.

What Does Your Investment Teaser Need to Gain Attention

As I write an “Investment Teaser” or one page summary of a business for sale, I thought I would share with you the key points to include.

An investment teaser is a one or two-slide summary of a potential sales process that does not release the name of the potential target company, in order to maintain the company’s identity as confidential. A teaser should include the unique selling points of the company while ensuring that the value of the business is understood by a large audience. Tricky to achieve!

Industry Overview: The healthcare industry is rapidly evolving with the introduction of innovative technologies that provide efficient and effective healthcare services. Our target company operates in the healthcare technology sector, which is experiencing strong growth and a highly competitive landscape. The company has developed unique and cutting-edge technology that is transforming the industry, with a focus on providing personalized care and improving patient outcomes.

Business Description: Our target company is a leading provider of healthcare technology solutions that cater to hospitals, clinics, and healthcare providers. The company offers a suite of products and services that enable healthcare providers to streamline their operations, increase efficiency, and improve patient care. Its proprietary software platform allows healthcare providers to manage patient records, track medications, and monitor patient progress in real-time.

Location: The company is headquartered in the United States, with operations in several other countries. Its presence in strategic locations enables it to cater to a wide range of customers and expand its market share globally.

Financial Summary: The company's revenue has grown at a CAGR of 25% over the past five years, and it is projected to continue its strong growth trajectory in the coming years. Its EBITDA margins are forecasted to reach 20% in the next three years. The company is seeking investment from private equity firms, venture capitalists, or strategic investors, with a revenue range of US$50 million to US$500 million.

Investment Rationale: The company's unique technology, proprietary software platform, and focus on personalized care provide a significant competitive advantage. Its recurring revenue model, strong customer base, and global market presence offer a compelling investment opportunity. The company's cutting-edge technology and its ability to transform the healthcare industry make it an attractive investment for investors looking for high-growth opportunities in the healthcare technology sector.

Customer Overview: The company has a diverse customer base that includes some of the largest hospitals and healthcare providers globally. Its customers include renowned healthcare brands, such as Mayo Clinic, Cleveland Clinic, and Johns Hopkins Medicine, which are testament to the company's credibility and expertise in the healthcare technology industry.

Transaction Structure: The company is open to exploring various transaction structures, including a complete sale of the business or a carve-out. The preferred transaction structure will depend on the type of investor and the investment objectives.

How to build a business that can run without you

As entrepreneurs, we pour our heart and soul into building successful businesses. But what happens when we're ready to step back and let others take the reins? How can we ensure our businesses can continue to thrive without our constant input? These are the questions that will be explored at the Business Transition Forum in Toronto on May 9th.

As a speaker at this event, I'm excited to share my insights and strategies for building a business that can run without you. I'll be joined by other industry experts who will share their own experiences and advice for growth and transition.

But why is this topic so important? For starters, it allows entrepreneurs to focus on what they do best. When you build a business that can run without you, you can delegate tasks and responsibilities to others, freeing up your time to focus on your strengths and passions.

In addition, building a sustainable business is crucial for long-term success. By creating systems and processes that can operate without your constant input, you're ensuring the longevity of your business and paving the way for future growth.

So, if you're ready to take your business to the next level, I invite you to join me at the Business Transition Forum on May 9th. You'll have the opportunity to learn from industry experts, connect with other like-minded entrepreneurs, and gain new insights and strategies for growth and transition.

I hope to see you there!

Decisions When Setting Up a Family Office

You are thinking about setting up a Family Office but are wanting to know what are the decisions you will need to make. A good step is to start with your strategy or compass.

Launching a family office can be a complex and involved process, and requires careful planning and execution. In order to create a successful family office, it is important to have a clear strategy or compass that outlines the mission, values, and vision of the office, as well as the scope of services and activities that it will provide. A “Compass” will reduce family misunderstandings and potential friction. Here are some key elements you can use to consider when creating a family office blueprint:

Mission, Values, and Vision: These three elements are essential to defining the purpose and aspirations of the family office. The mission statement should articulate the overarching goal of the office, while the values statement should outline the guiding principles that will govern its operations. The vision statement should provide a long-term view of what the office hopes to achieve.

Scope of Services and Activities: The family office should clearly outline the services and activities it will provide to its members. This could include wealth management services, investment advice, estate planning, tax planning, philanthropic services, and more. It is also important to consider whether the office will provide staggered services for different family members, or whether it will provide all services to all family members. Additionally, a masterclass in investing and due diligence of the portfolio could be considered.

Financial Situation and Future Goals: A thorough analysis of the family's current financial situation is essential to creating a successful family office. This should include an assessment of assets and liabilities, as well as an evaluation of future goals and objectives. It is important to understand the family's financial needs and priorities in order to develop an effective long-term investment strategy.

Risk Tolerance and Investment Objectives: Determining acceptable risk levels and investment aims is crucial to creating a successful investment strategy. The family office should work with its members to identify their risk tolerance and investment objectives, and then develop a plan that aligns with these goals.

Long-Term Investment Strategy: Developing a comprehensive long-term investment strategy is essential to achieving the family's financial goals. This should include a plan for asset allocation and diversification, as well as an evaluation of potential investment opportunities.

Governance and Decision Making: Establishing the family office's organizational structure and decision-making processes is critical to ensuring that it operates effectively. This should include clear guidelines on who has decision-making authority, as well as how decisions are made. Additionally, it is important to establish clear accountabilities, such as attending meetings and participating in decision-making processes.

Key Stakeholders: Recognizing crucial family members, advisors, and service providers is important to the success of the family office. This should include identifying key stakeholders and developing strategies for engaging with them effectively.

Operational Capabilities: Assessing the family office's infrastructure and capacity is essential to ensuring that it can deliver the services and activities outlined in its scope. This should include an evaluation of staffing needs, as well as an assessment of the technology and systems required to support the office's operations.

Monitoring and Evaluation: Having an external expert to track progress towards goals. Remember to celebrate the wins!

In conclusion, launching a family office requires careful planning and execution. By following these key elements outlined above, you can create a successful family office that supports your family's financial goals and objectives. It is important to remember that the family office blueprint is a living document and should be regularly reviewed and updated to ensure that it remains relevant and effective over time

Five Questions to Ask Before You Set Up Your Family Office

Congratulations on selling your business and acquiring new wealth! Here are five questions an entrepreneur needs to ask when setting up a family office:

1. What are my family's values and long-term goals? Understanding your family's values and goals is essential in creating a comprehensive wealth management plan. Do you want to invest in a specific industry or cause? Do you want to leave a legacy for future generations? Would you like to involve your family now? Would you prefer to manage the wealth without your spouse and children or do you want to be transparent about your plans? Answering these questions can help shape the structure and strategy of your family office. This part can be the stumbling block to moving forward and I recommend doing this quickly. Write down a few notes about your own attitudes to money and how you made wealth. You can come back to it and review and embellish it. Family office experts say that trying to do values to please the family can take years. Rather get something down on paper and move to step two.

2. What services do I need from a family office? A family office can offer a range of services beyond investment management, including philanthropy, estate planning, tax management, and family governance. Some families want to be able to ask for the administration, taxes, payment of bills, and so on, to be done for them too. Determine which services you need based on your family's specific needs. Check with your spouse who may have different preferences to add to yours. Your spouse, daughters, and sons, may have different approaches to wealth and investing. Pick investment partners who want to include your spouse and children in the conversation and who can offer alternative options to pick up on family members’ different goals. This could also include a Masterclass in investing or lunches with experts, in order to grow their knowledge. Although many men want to run the money alone and do not include their spouse, research shows you will have a much happier retirement. By including your partner, even with an annual portfolio review and lunch with your family office experts, you are giving the gift of knowledge. Teach or explain why you have selected these trusted advisors to manage the family wealth. I often have fathers dismiss their daughters’ attitudes to money as they are watching for natural curiosity and excitement over growing wealth. I believe holding back is a bit of putting the horse before the carriage. Interest and responsibility in wealth management are often not going to happen unless the father takes their offspring through a personalized “Life Lessons about Wealth” masterclass. Then miracles will happen.

3. How much control do I want to maintain over my investments? Family offices offer varying levels of control and involvement in the investment process. Some may prefer to take a hands-on approach, while others may prefer to delegate most of the decision-making to a professional wealth manager. Often, it is the death of a best friend that can trigger the entrepreneur to realize they need to make it simple for their beneficiaries to find their wealth and take over. Only then will they begin to transfer shared knowledge of the investments and where they are scattered. Staging the amount of control is a good option to consider. At the least, introduce your spouse and beneficiaries to your family office so that they are not left scrambling if you are not able to communicate your wishes.

4. How much risk am I willing to take on? As with any investment strategy, there are risks involved. Too often, entrepreneurs who are used to living with high risk every day, carry over that risk attitude to their investment portfolio. Having an expert will protect you from your own investment psychology. You will have a plan and be able to resist emotional investing with your friends to be part of their group. Determine your family's risk tolerance and work with your family office to develop a customized investment plan that aligns with your risk profile.

5. How do I choose the right family office for my needs? Research and evaluate potential family offices based on their expertise, experience, reputation, and fees. Consider their investment performance, client service, and alignment with your family's values and goals. A single-family office usually is set up with $100K of investable assets. Other options are multi-family offices that manage usually over ten similar families with wealth. Firms that are “asset gatherers” are also good partners as they have an investment focus and are not trying to be everything to everyone. A good fit is critical to the success of your family office.

A conversation with Ken Wong, marketing guru, and Tony Chapman

I recently listened to an episode of "Chatter That Matters" podcast hosted by Tony Chapman and featuring Ken Wong, Marketing Guru. The episode was focused on supporting entrepreneurs and providing practical tips for building a successful business.

One thing I really appreciated about this podcast was the relaxed and conversational tone between Tony and Ken, who had great chemistry. It really felt like they were having a genuine conversation, sharing personal views about the growth of entrepreneurism and then personal insights into the state of education here in Canada. It made me wonder what will the impact be on the future of entrepreneurship and business development.

I have a personal thank you to Ken. I appreciated the help he gave me with my book, Money Magnet: How to Attract Investors to Your Business. For his support and enthusiasm, I remain eternally grateful.

Thank you, Tonay and Ken. Inspiring and a great boost for 2023.

IIAC Top 40 Under 40

One of the most dynamic award programs is Canada’s Top 40 Under 40. I was asked to be a judge which was a great honour for me. The main areas of distinction were to look at level of innovation and also of community service. As I went through the list of outstanding young achievers in Canadian business, I was impressed to see the visionaries and innovators pushing the way things are done. Every applicant was inspiring others and already giving back to their communities and to Canada. And every one of them is under the age of forty. Impressive.

Founded in 1995 by Caldwell, Top 40 is the country’s most coveted award for young business leaders, often the first program to shine the spotlight on many successful Canadian notables. Honourees have gone on to create remarkable track records of achievement post-award; the ranks of Top 40 alumni include hundreds of nationally and internationally prominent CEOs, CFOs, executives, and entrepreneurs.

The Awards evening was spectacular and it was exciting to see all the under 40s busy networking.

I was fortunate enough to be seated with Ian Russell, former head of IIAC, who runs a superb newsletter that I recommend. I also got to sit with Sue Lemond, Head of the CFA, who gave me insight into CFA standards and global reach.

5 Questions for the Family Office

At a presentation by Carbon Cap, visiting Toronto this week, I sat next to one of the top family office owners, not their CFO but the family member who has taken over his family’s wealth. He told me how difficult it was to choose investments for his Family Office and to clear out the real investment opportunities versus the hot air. This conversation seems particularly relevant as the week continued and with the cratering of FTX, even Ontario Teachers’ Pension Plan had a loss of $75M CAD. Fortunately, that loss is minimal in OTPP’s larger portfolio, who has an excellent record as investors. It goes to show how difficult it can be to pick investments.

The Family Office owner is on the right track when he personally meets with investment teams and asks direct questions.

Every Family Office has a list of standard questions to investigate before investing and to ask again on the annual review. Mike Azlen, Founder and CEO of Carbon Cap, shared with me the top five questions he would recommend that every Family Office should ask and investigate.

Key Questions for Family Offices to Use:

1.       Alignment of interests (fees, third-party allocations, owners’ own investment alongside clients, conflicts of interest)

2.       Positive Referrals: always get at least 3 referrals from existing clients

3.       Length of time in business, infrastructure, and resources, profitability, headcount, and qualifications of key people. Be looking for turnover of key people.

4.       Investment track record (independently audited). What is their Governance quality - must-have board members with a strong track record.

5.       Fully regulated and no regulatory infractions audited financial statements, etc.

Women Worth and Wellness with RBC Wealth Management

RBC’s Paul Chapman presented the Women Worth & Wellness™ golf fundraiser with LPGA Winner Sandra Post. Over 50 women joined the golf event held at Duntroon Highlands Golf course to play the tournament and compete for best, drive, longest putt, and other prizes.

Net proceeds are for the Collingwood General & Marine Hospital Foundation (CGMHF) to support their continued focus on women’s health and wellness innovation.

Highlights

• Coaching by Sandra Post and Mary Pat Quilty, PGA of Canada, from Settler’s Ghost Golf Academy, made sure everyone got personal attention.

• From the CGMH Foundation, Jory Pritchard-Kerr gave details on the hospital’s fundraising efforts, focus on helping women, and the impact of the Wellness Innovation Fund

• Art donation by Jacoline Loewen and Mary Jane Jones.

Commit to your business- Sam Walton and his 10 rules of business

Have you visited the Walmart museum? It s a tribute to one of the greatest miracles of modern business—a scrappy 5 and 10 store in Northwest Arkansas that somehow managed to become number one on the Fortune 500 and the Fortune Global 500. Regular readers of this blog know I focus frequently on how leadership has changed in the last few decades. But I was struck by founder Sam Walton’s 10 rules of business, posted on the museum wall, which still seem to strike all the right chords. They are, in short form:

1. • Commit to your business.
   • Share your profits with your associates.
   • Motivate your partners.
   • Communicate everything you possibly can to your partners.
   • Appreciate everything your associates do for the business.
   • Celebrate your successes.
   • Listen to everyone in your company.
   • Exceed your customers’ expectations.
   • Control your expenses better than your competition.
   • Swim upstream.

I particularly like the last one, which was Mr. Sam’s way of saying: “disrupt yourself.” It is in my books, the hardest to achieve. It is why large companies slowly deflate and end.

Canada's Unicorns

Who are the most successful founders, and what do they have in common?

The 2022 Canada Unicorn Founders report by Antler gives an excellent overview of the Canadian entrepreneur scene. Read the full report is by Antler, a fund investing into Canada.

There are 56 founders from 26 unicorns that were founded in the last 27 years in Canada and are still privately held. While in the past, Canada’s tech ecosystem has had a reputation of being in the shadow of the US, perceptions are changing thanks to its tremendous success over the last five-to-seven years. In 2021 alone, we saw 15 Canadian startups attain unicorn status—more than the number of unicorns created in the entire history of the Canadian private sector before then. So far in 2022, six new Canadian unicorns have already emerged (source: Crunchbase data). This report is by Antler, a fund investing into Canada.

Exhibit 1: Canadian unicorn list by sector

Exhibit 2: Startups to reach the unicorn status in Canada by year

I write a monthly newsletter titled “Things that Have a Value, but Do Not Have a Price." Topics include Canadian business, finance best practices, and entrepreneurship. It is absolutely free and there is no marketing, sharing or using any of your information.

Sign up for my newsletter.

Myths of Venture Capital

Meet George, owner of a competitor we can call Plastic Pots, a successful manufacturer of plastic plant gardening containers. George gave a speech at the annual Manufacturers’ Conference. He got most of his points from the internet blogs going on about the big boys of private equity and how much money they are raking in at owner’s expense. He loved the bad stories of private equity, skimming over successes in his plastics category. 

George said, “Those private equity locusts—their money is more expensive than a bank and they’re more destructive than Lord Voldemort of Harry Potter fame. I warn you, you’ll be up to the eyeballs writing reports, forced to show up at their meetings and slaving on a treadmill while they treat you like an ATM machine—cashing your profits.”  

As an alternative, George advised taking on many investors, “They’re easier to control. Go the syndication route—multiple investors. It’s the ‘divide and conquer’ method. You keep control—the other partners are fragmented. Make sure you hold separate meetings—not with all your investors in the room. Don’t risk one person hijacking it to argue valuation.” What George failed to mention was that this is a double-edged sword and that the more investors you have, the greater the “time suck” keeping them all happy.

George’s favourite line was, “I don’t want some nobody outsider sharing control of my business. What can they add beyond the money my bank loans give me—and at a cheaper price, too, thank you?” Blinded by familiarity with his own ways, he insisted, “I’ve run my company for years. Who can tell me something I don’t know already?”

Turns out, a great deal. Less than a year later—with the oil crisis, and the rising domestic currency making Chinese plastic exports so much cheaper—Plastics Pots financial statements showed a different story. With no board to force George to justify his “head in the sand” strategy, he chose to not consult his team.  

With an outside investor who has similar companies in their portfolio, George would have been forced to do what Jim Collins, author of Built to Last, calls “Facing the brutal facts” and act.  Investors could have injected capital, clarified the strategy, spread the risk of setting up that branch manufacturing plant in Mexico and found him the expertise to execute. George never gave private equity a chance. His hubris, his arrogance of thinking he knew better, makes George a modern-day Icarus, the Greek lad who wore wax and feather wings and flew too close to the sun—despite his father’s warnings. 

The new manager at George’s bank, a newly minted MBA, pointed out that George’s income statement was no longer meeting the covenants required by the bank. He chose not to give George a chance, and closed down the business. 

Your Leadership Gets Challenged

Love it or hate it, contestants on American Idol have to endure pitiless and very public critiques of their performance by a panel of judges. The judges’ role is not to coach the performers, but to decide which singers can possibly sell massive number of records—in other words, make money. After all, lead judge Simon Cowell has put his own cash into winning performers. 

Yet, invariably most singers (and much of the audience) seem confused about Simon’s role, looking for slobbering approval as if he were their patient, supportive coach. Wrong. Think about the many cringe-worthy singers who angrily responded to Simon’s criticism by saying, “What do you know, anyway?”  (Presumably, a great deal about what it takes to get music fans to shell out). These sulky singers would have benefited far more by demonstrating the emotional maturity to listen and actually prompt Simon for more comments, as he is well worth hearing out—albeit ruthlessly blunt. 

Take a good, long look in the mirror. Do you take feedback as a massive assault? Do you immediately launch a missile at your attackers, thinking, This will show them?

A private equity relationship begins with the intensity and candidness of Simon. Investors will hold you up to the cold, unforgiving light of day to judge if your business could make money in the future. As they go through the steps of deciding whether to give you their cash, they are not going to coach you on your next steps or how to improve. 

When their criticisms flow, will you have what it takes to listen?  Will you move on to the next round, or are you one of those Idol wannabees furiously stomping off the stage, too insecure to hear the realistic comments you need, oh so badly, to hear? 

“95% of people are just not built the same as entrepreneurs” says Alan McMillan, serial entrepreneur. “They would get too discouraged from all the rejection to continue. But those who succeed are able to treat criticism well—almost with the dual ability of treating it as water off a duck’s back while also absorbing the important points. Those emotionally developed entrepreneurs get financing. Emotional control can be learned.”

It’s the Baby Boomers Again

There is a caveat to all of this. The python digesting that huge lump known as the Baby Boomers is finally getting close to the end of its meal. It is retirement time for the Boomers. And that means that they are already offloading their businesses and it will accelerate over the next five years. 

As with every market before it, the Baby Boomer life cycle will distort the private financing market. Since much of money stems from business trends, these happy times for private equity will come to an end. It’s as predictable as a Hollywood summer blockbuster. Just as we had tulip mania in Holland during the 17th century, or the dot-com bubble of 2000, now we have the private equity boom. In the middle of a bubble, it is hard to remember that all things do go ‘pop’. 

The private equity bubble is already upon us: baby boomer businesses are already merging with or acquiring competitors in order to grow quickly. “Scaling up” means your company becomes more attractive to Private equity. If you're serious about attracting equity, you need to start today. There has never been a better opportunity for business owners and CEOs to access investment money. The emerging options of finance will change within five years, ride the tsunami wave of private investment and make sure you are not one of those business owners left far behind, gasping for help on the rocks. 

Families Transfer Wealth and Wellbeing Through Business Stewardship

Rob Sobey says his grandfather impressed upon him a profound lesson looking at a family farm during a country drive.

At an event held by the Canadian Association of Family Enterprises that I attended, Rob explained how years ago his grandfather was driving him through the countryside and suddenly stopped the car. He asked him to describe what he saw. The young Rob started to point out the large stretch of farm land with a barn and then, further away, the farmhouse.

"Go on," his grandfather said. "Describe the barn and farmhouse in detail." The barn was spectacular, while the farm house, in comparison, was solid, but not at the same level as the barn. "There is a family who will benefit from the well-run farm."’

The lesson that Rob’s grandfather wished to convey is something often overlooked by family enterprises: If you look after the business, it will look after the family. 

Family business owners too often run their company under the thought that the business serves themselves. But the long-term success of a business depends on more - namely, the overall well-being of the family and how they will continue to run the business into the future.

Read the full article on the Globe & Mail: https://www.theglobeandmail.com/report-on-business/small-business/sb-managing/family-business-transfers-wealth-to-the-next-generation/article24726493/

Your Competitors will Get Private Money

Make no mistake. Watch out for your competitor. You need to keep up with the Joneses. They will also be studying this emerging phenomenon of private equity. They might already be meeting with potential equity partners. What would be the worst thing they could do to your business if they suddenly got a cash injection of $1M? Or, if you have revenues in the $6M range, what could the Joneses do with $5M? 

A lot of damage, did you say? 

What if the Jones’ new, best friend was perhaps John Seminerio, an industry expert in your field and with a bigger vision of the global market?  Imagine if the Jones family now had the experienced help to manage the long supply chain, exactly as in the McGregor Socks case, from China and move most manufacturing to Mr. Private equity’s long-established contacts in Shanghai? What if they had Jerry Schwartz, CEO of Onex, one of the leading lights in Private equity, paying attention to your Board meetings and opening his Rolodex?

How do you like private equity so far?

By the way, if your business can’t possibly move production to China because you are in service or transportation, or because your products are too heavy or bulky to be flown economically across the Pacific, equity players will really, really like you because it would be hard to have your business get clobbered by cheaper imports.  Mr. Private equity will be hunting down the other players in your industry and pursuing your competitor companies with the determination of the single-minded Star Trek villains, the Borg. 

Except that private equity players are mostly a great deal nicer than The Borg. Come to think of it, it’s the public market, with its emphasis on conformity and consistent, reproducible results that operates more like the Borg, treating you as a replaceable number.

Older Generations Need to Think Ahead

“The key to successful transitions involves focusing that same energy on planning the next stage of life and putting their wealth to work through investments outside their own companies.” 

There’s always a lot of focus on starting a business, and not so much on successful transitions and successions - especially in Canada. Advocating for entrepreneurs and business owners to ask the right questions and take the right steps is an important part of my work. Don’t lose your legacy to poor planning. 

The article below is a previously published piece I wrote for Family Business United featuring Maria Milanetti, a partner at MarchFifteen, a consulting practice specialising in business transitions, and lasering in on the steps to securing your businesses’ future success.

Older Generations Need to Think Ahead

Why Your Business Needs a Board (And How to Build One)

The ICD and board governance tends to focus on how to run and maintain public boards of directors, but there are merits to building one specifically for private businesses. The role of board directors in the growth of privately-held technology companies is increasing in importance,

Jim Balsillie speaks in the globe and Mail about how board directors need,

“To better understand the role intellectual property and data governance play in the modern economy; the mitigation of cybersecurity risks; and corporate finance, including how to prepare for the journey to public markets.”

As the director of the board of the ICD SWO, I recently co-hosted an event focused on this very topic of private business boards titled “Why Your Business Needs a Board (and how to build one).”

We invited three successful entrepreneurs who have built businesses by developing and leveraging their boards. They were Randall Howard (Verdexus), Carol Leaman (Axonify), and Murray Gamble (The C3 Group). 

All three speakers compared the experiences between public and private boards as well as building several businesses here in Canada and in the US. Along with facilitator D'Arcy Delamere, University of Waterloo, leading the conversation, attendees received a first-hand account of the challenges private companies face when building boards, and why the demands of building one are more than worthwhile in today’s climate. In fact some argued that they are more than worthwhile, they are essential. 

Here are the top takeaways I summarized from the panel which also includes further articles:

1. There is a presumption amongst business owners that setting up a board of directors offers more risk than value. In fact, the opposite is true. The right board members can and aid the success of entrepreneurs by reducing risk in times of crisis and expanding their business network. 

Rutger von Post and Robert C. Pozen in MIT Sloan Management Review says that

“Being removed from day-to-day operations, independent directors can help management teams battling in the fog of war to pinpoint the critical factors for survival while uncovering opportunities that will allow the company to emerge stronger in a radically reshaped world.” 

2. Diversity and perspective, two key elements of a great business, are greatly enhanced by the outsiders you bring into your business. When you choose well, you gain value through increasing foresight and understanding of the variety of experiences available through the board. Diverse experiences are inspired from a variety of places whether they are based on gender, diversity, business background or expertise. It’s best to avoid having clones of your board members in order to improve the problem solving process, direction of the business and more. 

Paul Michelman in MIT Sloan Management Review  suggests

“When business leaders say, “We didn’t see it coming,” after their companies fail to recognize the legitimacy of upstart competitors or customers’ changing tastes, who is the “we”?

Our corporate directors and CEOs. In the global economy, the markets that a company serves become less predictable and more heterogeneous every day. When too many people at the top are looking at our dynamic world through the same static scope, they are far more likely to miss seeing the full landscape in all of its fast-evolving glory.” 

3. For an entrepreneur, building a board early on allows access to mentorship and strategic advice. Throughout heavy growth periods, a vital part of a fledgling business, getting fast and excellent input sves time and energy down the road. The role of the board can later cycle to a more traditional form of governance, meeting the evolving needs of the company at every stage.

Michael Camp writes in The Role of The Board In the Successful Startup of New Ventures: “The advantages to having outside directors include: 1) added credibility for the firm; 2) assistance with making major management decisions; 3) access to additional management expertise that is not otherwise available; 4) an unbiased outlook on the future of the company; and 5) a fresh perspective on many issues” (Daily and Dalton, 1992; Lauenstein, 1984; Nelton, 1985; Aronoff and Ward, 1992).

Stanislav Shekshnia writes in Harvard Business Review “The majority of board chairs are former CEOs, who are used to calling the shots and being stars. So it’s no surprise that many start behaving as if they are alternative chief executives of their firms. That sows conflict and confusion at the top. In addition, as research by INSEAD’s Corporate Governance Centre shows, the two jobs are distinctly different—and so are the skills needed in them. The chair leads the board, not the company, and that means being a facilitator of effective group discussions, not a team commander.” 

Thank you.

I want to also say a special thank you to Ginny Dybenko for working with myself and the ICD SWO to set up the event, and to everyone who attended. I hope to see you soon, and in the meantime, please do reach out to me if you have questions about the ICD.SWO Director’s Education Program, corporate governance, or would simply just like to say hello.