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 RULES OF ENGAGEMENT INC.
Baby Boomers – The Big PictureBoomers 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 RULES OF ENGAGEMENT INC.
Baby Boomers – The Big PictureCanada’s highest household incomes • 55% greater than post-Boomers • 61% higher than pre-BoomersBetter educated than any previous groups • 63% hold a college diploma or a university degree RULES OF ENGAGEMENT INC.
Baby Boomers – The Big PictureOwn more property than any other demographic group • 80% own a home (vs. 69% for the general population) • 25% own at least one additional property RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersBoomers own 1.5+ million businesses • Small – less than 50 employees • Medium – 50 – 500 employees No other segment comes close! Sources: Business Exit Strategies RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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 RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersMore than 70% of Canada’s independent businessowners 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 Canadian Federation of Independent Business RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 600,000+businesses owners plan to exit by 2015 A transfer of assets valued at $1.2 trillion Source: CIBC World Markets Report Canadian Federation of Independent Business RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersBoomers 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. RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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 RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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. RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersWhy 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 RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners The Founder’s SyndromeThis 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 RULES OF ENGAGEMENT INC.
The Founder’s Syndrome M aj o rit yCompany Value $ Survival Cash Flow – Profit – Live Style Retirement - Wealth Time RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners The Problem with ProfitEvaluating a business based solely on its profitability requires a buyer to look backwards at historical performance. RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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 RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners What can PrivateBusiness Owners do to add value to their company? Lots! RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners The Old Paradigm “If I work hard and build a profitablecompany I should be able to sell it and retire in comfort.” Value = Profit RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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 = PSTValue = Profit that is Sustainable and Transferable RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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 RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersThe Entrepreneurial Challenge Owner vs. President RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersRole 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 • Profitabilitysale of asset RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners Drivers of Drivers ofSustainable 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 RULES OF ENGAGEMENT INC.
Baby Boomer - Business OwnersRole of the Owner Role of the CEO ST Value = Profit that is Sustainable and Transferable RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners What is your Business Really Worth?What can you do to Maximize its Value? RULES OF ENGAGEMENT INC.
Baby Boomer - Business Owners 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 RULES OF ENGAGEMENT INC.
4 Steps to Increasing Value Manage forAssessment Analysis Action Plan Increased Value RULES OF ENGAGEMENT INC.
Manage forAssessment Analysis Action Plan Value ASSESSMENT • Industry Research Report • CoreValue™ Workbook • 17 Operational and Market Drivers • Industry Standards • Gather Financial Information RULES OF ENGAGEMENT INC.
Manage for Assessment Analysis Action Plan 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™ RULES OF ENGAGEMENT INC.
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 RULES OF ENGAGEMENT INC.
CoreValue™ Estimator 5 4$000,000 3 2 1 0 1st Qtr 2nd Qtr 3rd Qtr CoreValue Estimate Industry Value Estimates RULES OF ENGAGEMENT INC.
Assessment Analysis Action Plan 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 RULES OF ENGAGEMENT INC.
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. tomorrowValue = Profit that is Sustainable and Transferable RULES OF ENGAGEMENT INC.
Thank You. Michael Mangialardo President Rules of Engagement Inc. 416-399-6588RULES OF ENGAGEMENT INC.