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FVCAA Presentation by Pirorooz Pourdad, CA, MBA at PwC
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Canadian Entrepreneur; Demographic Change&Your BusinessPresentation to:
FVCAA
PricewaterhouseCoopers LLP 2
Introduction
• Let’s Look at some data
• Typical Entrepreneur
• Why is this important to you?
• Alternatives
• Preparing the Company
Source: British Columbia Small Business Profile 2012PricewaterhouseCoopers LLP 3
Status of Business Owners
0
50
100
150
200
250
300
350
400No. of Business Owners Age
55+000s
Forecast
1990-2000 2001-20120.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
%. of Business Owners Age 55+
Avg. y/y change
PricewaterhouseCoopers LLP 4
How big of an impact on the economy?
Within 5 years Within 10 years
2.0m
3.5m
Employment
Within 5 years Within 10 years
15%
27%
Percent of GDP
Source: British Columbia Small Business Profile 2012
Source: British Columbia Small Business Profile 2012PricewaterhouseCoopers LLP 5
Projected Retirement Date for Entrepreneurs
Within 24 months Within 5 years Within 10 years0
100
200
300
400
500
600
No. of Business Owners Planning to Exit
000s
No51%
< 24 months8%
2-5 years20%
5-10 years21%
Breakdown of Exit Within Next Decade
PricewaterhouseCoopers LLP 6
Total Value of Business Assets to Change Hands Between 2012-2017
$1.9 Trillion
$190 billion in BC alone
How Many are Your Clients?
Do you Know Their Plans?
Source: British Columbia Small Business Profile 2012PricewaterhouseCoopers LLP 7
Planning to Sell the Business
Atl. Que. Ont. Man./Sask. Alta. B.C.0%
5%
10%
15%
20%
25%
30%
35%
40%
% of Business Owners Planning Exit Within 5 YearsBy Region
Canadian Avg.
Source: Canadian Federation of Independent BusinessPricewaterhouseCoopers LLP 8
The Next Generation of Family Businesses
No59%
Don't know14%
Yes, an informal plan (unwritten)
21%
Yes, a formal written plan6%
Existence of Succession Plan
PricewaterhouseCoopers LLP 9
Typical Entrepreneur
67% have not broached the subject with family or business partner.
• Focused on business
• “Exit Strategy” not on the agenda
• The process is not known
PricewaterhouseCoopers LLP 10
Why is this important to you?
• This change is inevitable
• Change provides opportunities:
- Estate planning services
- Managing the proceeds
- Insurance products
- Commercial lending
PricewaterhouseCoopers LLP 11
Alternatives
• Retain Ownership
• Sell the Business
PricewaterhouseCoopers LLP 12
AlternativesRetain Ownership
• Prepare the family
• Empower management
• Stewardship v. Ownership
PricewaterhouseCoopers LLP 13
AlternativesSell the Business
• Financial buyers
• Strategic buyers
• Management buy-out
PricewaterhouseCoopers LLP 14
Sell the BusinessFinancial Buyers
• Pricing
• Advantages
• Disadvantages
PricewaterhouseCoopers LLP 15
Sell the BusinessStrategic Buyers
• Pricing
• Synergies– Quantify them
– Share them
– One-time costs
– Negative synergies
• Advantages
• Disadvantages
PricewaterhouseCoopers LLP 16
Sell the BusinessManagement Buy-Out
• Pricing
• Advantages
• Financing sources
PricewaterhouseCoopers LLP 17
Preparing the Company
• Build a strong management team
• Consider splitting off high value real estate
• Maximize earnings “tract records”
• “Clean up” the balance sheet
• Plan new capital investments
• Observe industry “cycles”
• Ensure MIS is in place
• Commission “Phase I” environmental assessment
Thank you