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

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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

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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

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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

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Why is this important to you?

• This change is inevitable

• Change provides opportunities:

- Estate planning services

- Managing the proceeds

- Insurance products

- Commercial lending

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Alternatives

• Retain Ownership

• Sell the Business

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AlternativesRetain Ownership

• Prepare the family

• Empower management

• Stewardship v. Ownership

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AlternativesSell the Business

• Financial buyers

• Strategic buyers

• Management buy-out

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Sell the BusinessFinancial Buyers

• Pricing

• Advantages

• Disadvantages

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Sell the BusinessStrategic Buyers

• Pricing

• Synergies– Quantify them

– Share them

– One-time costs

– Negative synergies

• Advantages

• Disadvantages

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Sell the BusinessManagement Buy-Out

• Pricing

• Advantages

• Financing sources

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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