business strategy

Oct 20, 2016

A novel way to solve the business succession crisis

Business people wearing informal dresses at work in their office

Originally published on October 10, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/a-novel-way-to-solve-the-business-succession-crisis/article32233973/

One of the biggest risks in the economy is the fumbled hand-off of family businesses from one generation to the next. The expession “shirtsleeves to shirtsleeves in three generations” sums this up nicely: the first generation builds a successful business, the second generation carries on in a diminished way, and the third generation inherits a mess and then starts over again.

Imagine the benefits to the Canadian economy if we could improve the success rate of family-business succession. Important companies and capital pools could be preserved, jobs maintained, and successful business practices and innovations shared for the future.

Better planning, documentation and family communication are among the usual remedies prescribed to relieve the succession crisis. But none address the real problem. As the patriarch of one business family once said to me, “The hardest part is figuring out whether your children are worthy or capable of following in your business footsteps.” Meanwhile, his children had different thoughts: “Your footsteps are no longer heading in the right direction. Thanks for the years of building your legacy, but please take a back seat.”

Internships and family councils won’t bridge this generation gap.

But now a Montreal foundation has come up with an innovative new approach to help business families come together. And non-family business owners find this a model for relieving their own growth and succession bottlenecks.

Olivier de Richoufftz is president of the Business Families Foundation, set up by Philippe de Gaspé Beaubien, the former CEO of Telemedia, and his wife and business partner, Nan-b. Twenty-six years ago, after wrestling with finding the best way to hand their business empire to their three children, Phillipe and Nan-b formed the foundation to help other business families manage this problem.

Mr. de Richoufftz defines the problem this way: The parents running a business tend to assume their children will take over some day, but they rarely communicate their intentions until too late. Families rarely discuss who wants to do what in the family business. But even if successors and leaders are identified, problems remain:

    • When and how will the senior generation give up power?
    • With equal numbers of shares, how will the next generation work together?
    • How will they resolve disputes?
    • How do family-owned businesses hire and retain talented senior employees if they know the kids are going to come along and supplant them, or at the very least shake things up?

The foundation’s new approach, which is now being workshopped by a dozen business families in Quebec, addresses all these problems. It does so by changing the basic assumptions behind family succession. Instead of seeing the founders’ children as the inheritors and future executives of mom and dad’s business, this approach encourages them to become entrepreneurs – but with internal advantages. “We are turning business families into intrapreneurial families,” says Mr. de Richoufftz.

He says children in a business family should see themselves as intrapreneurs. That is, they should look for new business opportunities that would fit their skills and interests – and then tap the resources of the family business to help them start stronger and grow faster than the average independent business. (This brings new meaning to the phrase “mother ship.”)

The foundation’s 100-day Intrapreneur Program, co-sponsored by Quebec’s Caisse de dépôt, works like a business incubator. Its first cohort, which began in September, includes 15 intrapreneurial projects, each team including one or two intrapreneurs as well as a business mentor, or parrain, to hone their plan and help figure out the best way to work with the family business. “Instead of startups, our aim is to create spinoffs,” says Mr. de Richoufftz. “The family business is not here to give you a cheque, but to support your dream. After 100 days you’ll know if you’re qualified for this.”

The program brings participants together every two weeks for seminars, lectures and candid conversations on business plans and family dynamics. The intrapreneurs conclude the program by making a formal business presentation to their parents or first-generation business leaders, identifying the opportunity they see, and the resources (e.g. capital, facilities, or HR expertise) they wish to tap into from the family business. Mom and dad can push back, ask questions, or negotiate the family’s involvement in the new venture.

Result: the second-generation leaders access business experience and resources without disrupting the family business. Brothers and sisters can pursue their personal ambitions without getting in each others’ way.

Mr. de Richoufftz notes that some of these new “interprises” may become “way larger” than the primary business: “In some cases, we see the intrapreneur taking over the core company.” But such cases would see the intrapreneur as an experienced business leader moving in with a proven business model – not just a young amateur with kooky ideas. Such successful entrepreneurs would be better able to buy their parents’ businesses than they might have been as employees, thereby solving the financial-succession problem that often leashes together siblings who would rather not work together. “Only strong families build strong businesses,” says Mr. de Richoufftz.

The Business Families Foundation plans to launch a second cohort in February, and hopes to include family companies from Toronto and Vancouver. (The cost is expected to be $8,000 per venture.) Mr. de Richoufftz wants to take the program national, and then global: “We are looking at partners to help us scale it up.”

I am excited about this new model for improving the success of family business. But I’m also keen on the implication for other companies. Every business has trouble retaining great employees, especially senior people with high potential and great ideas. Why shouldn’t those employers find new ways to work with these people? By offering resources or even capital, business owners could stay linked with these employees, and share in their future growth, and learn from their success.

You don’t have to be related to think like family.

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Category: Intrapreneurship, Spyder Works

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Oct 13, 2016

When you have trouble making a business decision

Young businessman sitting in front of a chalkboard and trying to choose the right doorOriginally published on September 15, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/what-to-do-when-you-have-trouble-making-a-business-decision/article31750482/

All too often, I watch business owners freeze in the process of decision making. They might be considering a big, strategic change, or shifting a few team members into new slots. Often, however, they delay making the call. It’s as if they are waiting for the perfect answer. They’re hoping for an epiphany or, better yet, a genie in a bottle to make all their business problems go away.

Well, 25 years into my entrepreneurial journey, there’ve been no epiphanies for me, and certainly no genies.

Sooner or later, we are all faced with gut-wrenching decisions that can affect the future of our business and, as business owners, the well-being of our families. But no matter how challenging or unnerving they may be, we still need to make decisions and act on them, or our businesses could come to a grinding halt.

How can you break out of decision-making paralysis? I distill the decision down to its simplest possible form, using a highly scientific process I call: “Is it yummy or is it yucky?”

Let me explain.

As a young entrepreneur, I once found myself stalled when I had to make a key decision on the direction of my business. At dinner one night I asked for the advice of a successful businessman. I was expecting a deep, analytical response – but what he said instead has stuck with me for decades. He picked up the sugar bowl in one hand and the salt shaker in the other. “I want you to make a gut decision,” he said. “Is the opportunity yummy, or yucky?”

A simple, but profound question.

Why? This experienced, self-made business leader knew that I’d done a lot of legwork leading up to this point of (in)decision. He knew that I had thought about which customers my new direction would most likely engage, and how many clients it might alienate. He knew I had studied what the competition was doing, and that I knew where my market was headed. He knew I had run the numbers backward and forward to see where a “wrong” decision might leave the company, and my family.

In short, he knew that I was fully capable of making an informed choice – or, as I now think of it, an “informed gut decision.” For me, this is when you meld your thoughtful analysis with the broad gut understanding of your business that you have developed systematically over time.

One of my clients, Greg van den Hoogen, CEO of Pharmasave Drugs (Atlantic) Ltd., likes to call this the “art and science of decision making that comes from truly knowing your business – the facts and figures, as well as the bumps and bruises that come from having worked in it for a long time.”

Ironically, decision making should be quite simple. I mean, there are only two real decisions that you can make: Yes or No. This isn’t just cheery Mary Poppins optimism. As Jack Welch, the legendary former CEO of General Electric, once said, “Simplicity is an indispensable element of a leader’s most important function.”

Yes, you have to do your homework and know your business. But that doesn’t mean you need to overcomplicate your decisions. Once you have the information you need to solve a problem, take a breath. Often, a problem appears daunting just because we’re too close to it; all we can see is the complexity. Step back and trust yourself to make a right decision, grounded in evidence, experience and thoughtfulness.

Of course, there are no guarantees. You learn to choose the sugar over the salt based on the indispensable, acquired knowledge inherent in your management style and experience.

When I learned to trust my informed instincts, the “yummy” decision quickly became obvious. No one expects you to get it right every time. But as you learn to trust your gut, you’ll find it gets easier and easier to make the best decisions for your business.

Please pass the sugar.

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Category: Business, Icicle, Spyder Works

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Aug 25, 2016

Why you need to be selling your company every day

bigstock--132667199

Originally published on August 2, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/why-you-need-to-be-selling-your-company-every-day/article31141189/

About a year ago, I was listening to a prominent accountant speak to a room full of business owners. His message was both clear and simple: “Each day you should run your business like you are in the process of trying to sell it.”

This simple message created many frowns and furrowed brows. Clearly, people in the audience wanted to respond, “But I’m not selling my business, and I don’t plan to any time soon.”

Not the point.

It doesn’t matter whether you’re thinking of selling your business. Some lucky owners get to simply pass it on to the next generation. But the real point is this: You need to think and act like you are selling your business, every day.

Why? Selling a business is an extended process, often a gruelling one. Compare it to selling a house. The first step is to “stage” the property. This means taking a hard look at your surroundings with fresh eyes, to help you recognize which furnishings and decorations add to your home’s ambience, and which are just clutter.

It’s a tough thing to do. For most people, everything in their home represents a memory or a milestone on the journey of raising a family. Prospective purchasers care nothing for memory or sentiment, seeing every unnecessary element as a flaw that diminishes the value of your home.

When you are selling a business, the process is little different. Prospective buyers go through your numbers, your assets and your records with the diligence of a home inspector. They will scrutinize your sales, margins, inventory, returns, client list, receivables and payables. They will dig through your sales history and your new product or service pipeline, looking for any irregularity, liability, trend or threat that could detract from the value they are paying for your company.

While some may see this as a tedious, time-wasting process, I see due diligence as a very positive exercise. It’s a way to identify issues before they become problems. In fact, this process shouldn’t just be limited to when you buy or sell a business. I believe that entrepreneurs should initiate a mock due-diligence process every year, preferably just before their company’s annual retreat or strategy sessions.

Think about it. Your goal as the owner or manager of a company is to increase its intrinsic value (how much the business would be worth if it were going to be sold). By rigorously and formally questioning all of your business’s habits, assumptions and processes, you’ll develop a culture that embraces change and continuous improvement – and increases the value of your business on an ongoing basis.

In my opinion, your company’s value is the single best measure of how well you are running and building your business. Value incorporates all key time horizons that buyers and evaluators employ when assessing a business – how you are running your business today, what you are doing to keep it relevant and meaningful to your customers in the short term, and how you establish and execute on your grand, long-term vision.

“When it comes time to sell their business, many business owners are surprised to receive a lower valuation than what they had expected,” notes Murad Bhimani, a Toronto-based partner with accounting firm MNP LLP. “That’s why we recommend to our clients that they should operate and build their business as though they could sell it any minute. This keeps you focused on what is critical every day, such as sound operations, diversity of customer base, building a strong management team, and proactive product development.”

If your kitchen’s ceiling is leaking, you wouldn’t wait for a home inspection to find the cause and fix it. Don’t wait to see whether your company is leaking opportunities and profits. Whether or not you’re planning to sell, take a good long look at all of your key performance indicators on a regular basis. Your bottom line (and your wallet) will thank you for it.

And some day your children may, too.

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Category: Entrepreneurship

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