Tick Tock

Tick, Tock.
Is Time Running out for
Canada’s Baby Boomer
Business Owners?

RULES OF ENGAGEMENT INC.

Baby Boomers – The Big Picture

• There are over 80 million Baby Boomers in North America!

• In Canada, Boomers represent the largest single demographic
segment at approx. 10 million or about 30% of our
total population



Boomers control more of Canada’s
personal wealth than any
other segment.

• Net Worth 215% greater than Canadian median
• Canada’s biggest discretionary spenders
• 80% of all leisure travel
• 40% of all electronics
• 77% of prescription drugs

Source: Stats Canada



Canada’s highest household incomes

• 55% greater than post-Boomers
• 61% higher than pre-Boomers

Better educated than any previous groups

• 63% hold a college diploma or a
university degree



Own more property than any other demographic group

• 80% own a home (vs. 69% for the general population)

• 25% own at least one additional property


Baby Boomer - Business Owners

Boomers own 1.5+ million businesses
• Small – less than 50 employees
• Medium – 50 – 500 employees

No other segment comes close!

Sources: Business Exit Strategies



1.5+ million businesses
• 45% of Canada’s gross domestic product

• Employ some 60% of all Canadian workers

Source: Business Exit Strategies
Canadian Federation of Independent Business



More than 70% of Canada’s independent business
owners plan to retire or relinquish control of their
business within the next 10 years.

• More than 40% intend to exit within 5 years

• Business sales will double each year
for the next 10 years.

Source: CIBC World Markets Report



600,000+
businesses owners plan to exit by 2015

A transfer of assets valued at
$1.2 trillion

Source: CIBC World Markets Report



Boomers used sophisticated techniques over the past
decades to start, grow and manage their business
but have failed to understand the need
to plan an exit.

Only 15% have an exit strategy!

Michael Coyle: CentrePoint Business Advisors, Inc.



80 – 90% of business put on
the market fail to sell or
transfer successfully.

Of the businesses that do sell:

• 20% sell to a family member
• 15% sell to an insider
• 50% sell to a third party
• Balance are mergers, employee share ownership etc.

Sources: Business Exit Strategies



Perfect Storm
The net result of this perfect storm of
“aging and selling” could leave Boomers
on the outside looking in when it
comes time to ‘cashing in’ on
their life’s work and enjoying
the fruits of their labour.



Why businesses fail to sell:

• Owned and managed by original entrepreneur

• Owner is driving force behind success of business
• Supplier contacts
• Personal relationships with key customers
• Surrounded by long term employees who, over the years
developed internal policies, practices and processes
to accommodate their idiosyncrasies



The Founder’s Syndrome

This syndrome occurs when, rather than working
toward its long term mission, the organization
operates primarily according to the
personality/needs/wants of
the Founder or Owner.

Profit Orientation


The Founder’s Syndrome

M
aj
o rit
y
Company
Value
$

Survival Cash Flow – Profit – Live Style Retirement - Wealth

Time



The Problem with Profit

Evaluating a business based solely
on its profitability requires a
buyer to look backwards at
historical performance.



Buyers Want to Look Forward

They must be convinced that, at a
minimum, past performance
will continue under
their ownership.

An Asset with Appreciating Value



What can Private
Business Owners do to add
value to their company?

Lots!



The Old Paradigm
“If I work hard and build a profitable
company I should be able to sell it and
retire in comfort.”

Value = Profit



The New Paradigm
When a private company is put on
the market for sale, profitability is only
point of entry – it’s just the beginning.

V = PST
Value = Profit that is Sustainable and Transferable



Most entrepreneurial businesses
do not sell because they are not:

• ‘Sustainable’ – owner is driving force

• ‘Transferable’ – few or no processes
in place for new owner



The Entrepreneurial Challenge

Owner vs. President



Role of Owner Role of President

• Corporate Vision • Goal Setting
• Mission Statement • Day-to-day mgmt.
• Strategic Direction • Operational Efficiency
• Revenue Generation
• Profit Sustainability
• Customer satisfaction
• Stakeholder Value
• Financial Tracking
• Successful Transfer or
• Profitability
sale of asset



Drivers of Drivers of
Sustainable Profit Transferable Profit

• Market Share • Company Culture
• Growth Potential • Finance and Admin.
• Recurring Revenue • Sales and Marketing
• Operations
• Barriers to Entry
• Customer Satisfaction
• Differentiation
• Senior Management
• Branding
• Human Resources
• Customer Diversity • Legal
• Cost of Production



Role of the Owner Role of the CEO

ST



What is your Business
Really Worth?

What can you do to Maximize its Value?



With CoreValue™ You Can:

• Measure the true Value of your company
• Rate Company Performance against Industry Standards
• Assess Company Strengths and Weaknesses
• Define an Action Plan to Increase Enterprise Value
• Measure and Track Performance Improvements


4 Steps to Increasing Value

Manage for
Assessment Analysis Action Plan Increased
Value


Manage for
Assessment Analysis Action Plan
Value

ASSESSMENT
• Industry Research Report
• CoreValue™ Workbook
• 17 Operational and Market Drivers
• Industry Standards
• Gather Financial Information


Manage for
Value

ANALYSIS
• Industry Research
• Submit info - secure webpage
• Proprietary algorithm – industry rating
• Assess how sustainable & transferable business is
• Dashboard of Ops & Mkt. Drivers
• Estimated CoreValue™


Assessment Manage for
Analysis Action Plan Value

Action Plan
• Revenue/Operations/Financial
• Set goals in Action Tabs
• 17 Business Drivers
• SWOT analysis
• Tactical Plan
• Use Dashboard to monitor results


CoreValue™ Estimator
5

4
$000,000

3

2

1

0
1st Qtr 2nd Qtr 3rd Qtr

CoreValue Estimate Industry Value Estimates


Manage for
Value

Manage for Value
• Weekly/monthly review variance to budgets
• Monitor both Value & Profit goals
• Business Driver reviews
• Be agile – make necessary changes quickly


The Bottom Line

A higher ROI based on a new understanding of:

• Owner vs. President
• Profit vs. Value
• Sustainable Drivers vs. Transferable Drivers
• Managing for today vs. tomorrow



Thank You.
Michael Mangialardo
President
Rules of Engagement Inc.
416-399-6588


Tick Tock

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