Helping maximize financial outcomes in today’s business transitions

Within the next decade, many Saskatchewan entrepreneurs will be contemplating changing gears and simplifying their lives. Part of this process involves the transition of ownership of their business. Regardless of the industry, whenever this option is being considered, all business owners share one thing in common: the desire to maximize the financial outcome to help them achieve their personal, professional and long-term goals. Whether the goal is retirement, a new career opportunity or merely to reduce involvement in the day-today operations, there are fundamental steps that all entrepreneurs should take to protect their business investment and maximize their financial net worth. That’s where the team at Virtus Group LLP — Saskatchewan’s largest independently owned accounting and business advising firm — can help. With two offices — one in Saskatoon and the other in Regina — Virtus Group offers entrepreneurs more than just tax planning and accounting services. The company is a locally owned and operated Chartered Accountant & Business Advisory firm built on the vision of becoming the firm of choice for entrepreneurial businesses in Saskatchewan. This group of local decision makers and globally connected professionals thrive on creating strong financial solutions and better-managed businesses. Saskatchewan’s robust economy has led many business owners to believe that selling their company will be a fairly straight-forward, swift and lucrative process. They often feel they are the ones who are best equipped to sell their own business, as they are the most knowledgeable about it. “While this certainly might apply to the day-to-day operation and overall management, business owners generally are not knowledgeable about critical things like negotiation, deal structure, tax implications or market conditions,” said Doug Frondall, managing partner at Virtus Group and a recognized authority on Mergers and Acquisitions (M&A). “Even though there’s likely never been a time in the province’s history with such significant interest in owning Saskatchewan businesses, the reality is only one in four businesses will actually sell.” The reason is simple: buyers are looking to acquire wellmanaged, profitable and progressive entities. No one wants to purchase someone else’s problems. It’s often a lack of adequate time dedicated to the preparation and implementation of a succession plan that’s the main reason for failed business successions. Frondall explained that while we can all appreciate the challenges facing independent owners who manage day-to-day operations, it’s also critical that we recognize how organized structures, systems and processes can impact an owner’s ability to spend more time doing things of added value to the company. “A buyer is seeking an acquisition that has been positioned for future success, growth potential, is well managed with respect to efficiency and risk, and has a second tier of management capable of playing a larger role in operating the business going forward,” he said. To assist owners with positioning their company for success, Virtus Group’s experienced and knowledgeable team includes chartered accountants, business advisors and business valuators. They work closely with clients on a formal sevenstep exit-planning process to develop sustainable strategic business solutions that maximize efficiency, minimize taxes on the sale or transition, and increase the financial well-being of the organization. Whether an owner plans to pass the business on to family, key employees or sell to an outside party, the process requires thought, preparation and time to implement. “Determining the value of your business is a complex process,” said Aaron Dill- man, partner at Virtus Group and a chartered business valuator (CBV). “But it’s a process that is fundamental in developing a strategy to maximize a business owner’s return on investment.” Recognizing what creates value in a company provides a base to establish a selling price and/or identify aspects of the business that may be detracting from it. An independent valuation report incorporates the value of tangible assets (such as land and equipment), intangible assets (such as knowledge, people and brand reputation), the nature of the income generated and associated risks in protecting that future income stream. “Having an independent valuation performed by a credentialed valuator like the ones here at Virtus Group can provide an accurate snapshot of the strengths and weaknesses of an organization,” added Dillman. The result, he said, can be recommendations to maximize value of the business, as well as help prepare for searching out qualified buyers. Once owners understand what creates value in their business, steps can be identified to enhance overall value, making it easier to attract qualified buyers. While different industries (and buyers) may have different criteria when it comes to business acquisitions, there are some qualities that have universal appeal to prospective buyers. These include sales volume potential, loyal customer base, complimentary products and services, quality manufacturing equipment and facilities, transferable long-term leases in a good location, strong growth potential, market share, retail shelf space, and talent. When it comes to transitioning out of a business, owners are inevitably faced with having to make a difficult decision: transition to family members or key employees, or sell to an outside buyer. Regardless of which path they choose to take, an owner should plan to spend a couple of years preparing for the transition in order to guarantee top dollar for his or her business. This time frame is critical, say the experts at Virtus Group. “They need to consider how to maximize the transition and the selling price,” explained Frondall. “They need to seek advice on market conditions as well as deal structure and the resulting tax implications. They must also understand how the terms of the agreement are going to affect their long-term net worth.” Virtus Group’s experienced M&A professionals will manage potential transaction risks by optimizing the price, terms, conditions and structure of a deal. Utilizing such services helps to level the playing field when it comes to negotiating with experienced buyers. M&A professionals also provide necessary impartiality when negotiating internal transitions. Whether navigating an acquisition or assessing and negotiating a potential merger, owners need to ensure their advisors have the technical skills and transactional experience to maximize their results. Between negotiating millions of dollars of client transactions and navigating their own firm’s legacy and ongoing succession plan, Virtus Group has continued to remain in step with Saskatchewan’s local economy and business owners’ needs. Over the years, Virtus Group has become a pre-eminent valuation and full-service accounting and business advising firm. They have invested in the education and professional designations of their business advising team to build the largest group of chartered business valuators (CBV), certified valuation analysts (CVA), and chartered merger and acquisition professionals (CMAP) in the province. In doing so, Virtus Group ensures that Saskatchewan business owners can reap the financial benefit that collective and demonstrated expertise brings to every litigation, financial and valuation situation. Over the past few years, Virtus Group’s expertise and experience has become widely-known and highly regarded across the country, with several of their professionals providing strategic yet practical solutions to many of Canada’s most successful entrepreneurs. Virtus Group’s belief that Saskatchewan business owners and professionals can compete with the best in the world also prompted them to enhance their firm and extend their reach by becoming a member of PKF NA, an international and North American association of legally independent accounting firms. From offices in Saskatoon and Regina, Virtus Group is able to access the experience, knowledge and resources of a global network of highly respected international firms and share this expertise with the business owners of Saskatchewan and the rest of Canada. This global connection is particularly advantageous for engagements requiring international tax expertise or confidential searches of qualified buyers or sellers throughout the world.