Boomers will pass $4 Trillion to the Next Generation business owners over the next 5 years

The huge transfer of small business wealth is the last big direct impact that the baby boomers are going to have on the economy during their working lives, said Glenn Huber, president of Calgary-based private equity firm Chrysalis Acquisition Partners Inc. After that, boomers’ big influence will be mainly on the travel industry, retirement homes, and ultimately, the funeral business.
 

Jacoline Loewen, director of business development

Mr. Huber’s company has set up a fund, the Chrysalis Acquisition Fund 1, to buy up small and medium-sized businesses in Western Canada that are looking for an alternative to selling to heirs, employees, or individual buyers. In many cases the fund will partner with a small firm’s remaining management, providing the capital to help buy out the founder.
 

Jacoline Loewen, director of business development at UBS Bank (Canada)
 and an expert on small business succession, said the recession delayed the start of the boomer transition because many entrepreneurs did not want to sell out while the economy was weak. Now, she said, many are ready to think about it, although few have done the necessary preparation. That has created an even bigger bubble of small companies ready to change hands.
 

Ideally, business owners should begin thinking about transition five to 10 years before they leave, she said, and even before they hit their 50th birthday. In preparation, they should hire advisers, or at least set up an expert advisory board that can help guide them and provide contacts. But baby boomers tend to overestimate their health and stamina, and “stay on for far too long,” Ms. Loewen said.
 

The first choice for many small business owners is to have their children take over, Ms. Loewen said, although often the kids just aren’t interested, having seen the toll that running an enterprise can take. When the children are keen to take over, she said, a proper valuation of the business needs to be performed, and the next generation should be prepared to buy in – even competing with external buyers if necessary.
 

At Alps Welding, Mr. Dussin and his parents set up a structure where he received shares that will gain value as the business grows. Eventually, he can buy out his parents’ holding.

More importantly, Mr. Dussin said, was the gradual process of shifting managerial control from one generation to the next. He came in as vice-president 11 years ago, then took on more responsibility over time, becoming president about five years ago.
 

Mr. Dussin’s father is still involved, and that is a key aspect of baby-boomer business succession if it is to proceed smoothly. “This business is my father’s life … He doesn’t have a lot of interests outside of work. It is not like he has been waiting to play golf five times a week,” Mr. Dussin said.

PricewaterhouseCoopers, in a recent report, predicts a “highly competitive buyer’s market between 2018 and 2025” for family businesses, and suggests that many owners will not get the nest egg they hoped for.

 

Over all, the sale of small businesses in the coming decade will involve a massive transfer of assets – estimated at between $1-trillion and $4-trillion in Canada alone. And if many of those businesses simply close up shop, it could damage the economy through significant loss of employment.


Boomers will pass a small-business baton worth as much as $4-trillion

by RICHARD BLACKWELL

The Globe and Mail

Published Tuesday, Nov. 10, 2015

Selling your business? Can you avoid these 5 pitfalls?

Selling a business is harder than buying one. During the long process of selling, with the buyer kicking the tires in interest, the seller may find it hard to resist dropping the price as flaws and shortcomings become magnified. But whether the owners are keen to sell or not, their top concern will be to get the best price. Failing to get maximum valuation can occur for those owners taking on too much of the process themselves.
Why are prices adjusted downwards during a sales process? Here are a few common reasons about why sellers may get a less than top valuation:

1. My time is limited. Owners who have sold their businesses often complain about how long the process can take, and how it takes time away not only from customers, but from helping their teams keep operations running smoothly.

Gordon Forsythe, president of Compass Capital Corp. and buyer of companies, emphasizes the importance of knowing what you’re getting into. “Ideally, it would be beneficial for individuals who are considering selling their companies to understand how disruptive the sales process is to the day-to-day operation of their business,” he says. “The sales process typically becomes an all-consuming effort and unfortunately diverts attention and focus that is required to effectively operate the business.”

2. I am the smartest guy in the room. The mergers and acquisitions process is not something typical owners have done before, or if they have, it’s not their expertise. Owners often fall into the trap of thinking they are the best person to sell their businesses when in fact they should be focused on continuing to run the business.

Sure enough, they usually are the smartest guy in the room and could do whatever they want to achieve. For example, these capable entrepreneurs could fix their own dental cavity but why not get a true expert, the dentist? After all, dentists have trained and spent their career taking care of patients' teeth. It is the same for transition of the business. Find the experts and put your time into what matters more.

A mismanaged sale can have several ramifications, says Mr. Forsythe. “If employees begin to fear for their positions, they may retreat into self-preservation mode, and negatively affect the productivity and direction of the company. Likewise, clients may see this as an opportunity to re-evaluate their relationship with the company and look for alternative suppliers. If the purchase fails to transpire, the company may have wasted considerable resources, which would have been better spent growing the business.”

3. Let’s sell the whole thing. Sellers who investigate whether parts of their businesses could be carved out of the core and sold separately are sometimes able to spin off a division. They can take this additional capital and re-invest it into a growth strategy or use the liquidity to pay out a family member, partner or shareholder, for example, who wants out of the business. There’s no need go with the ‘all or nothing’ sales strategy.

4. A bird in the hand. Along comes a large, brand name company that wants to buy the business. If the first thing that comes to mind is “here’s a good offer, might as well take it as I may not get something like it in the future,” think again. When the seller chooses to go through the courtship process without lining up a range of alternative suitors, there’s the increased risk of falling in love with the prestige of the impressive big brand name and accepting an undervalued sale price as a result.

5. They should be happy to get us. Every owner thinks that his or her business is unique, and the relationships built with customers and suppliers are special. And though this may be true, the buyer may not feel the same way. Watch out for attitude during a sale, and exercise humility.

Due diligence isn’t just for buyers. Smart owners should hire their own corporate finance experts to eliminate surprises that could reduce the sales price. The seller can then be reassured that their house is in order and their strongest features and assets are put forward.

This article first appeared as a column - Special to The Globe and Mail

Jacoline Loewen is a director at UBS Bank (Canada), Wealth Management. She focuses on transitions for family businesses and closely held small to medium-sized enterprises, as they sell and move from being business owners to being managers of their wealth.

Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business.

You can follow her on Twitter @jacolineloewen.

 

Sustainable Investing delivers winning stock portfolio over long term

Jacoline Loewen, Sustainable Investing, Vancouver, 2017

In Vancouver, presenting on Sustainable Investing. Thank you to the Swiss Consulate for hosting us at the official residence of the Swiss Confederation. Great event.

The thesis is that sustainable business practices can be much more than a cost, a good deed, or good public relations for businesses—it can be a source of competitive advantage. In his 35 years in the investment industry, Bruno has experienced that picking sustainable companies for investing does not mean forgoing a higher return.  

Bruno runs the Global Sustainable Fund which brings a way to look at the relationship between business and society that does not treat corporate profits and societal well-being (including sustainability) as just a balancing exercise. It is good business and the consequences mean lowered reputational risk to brand equity, for example. 

United Airlines is experiencing the social consequences of their lack of sustainable corporate culture and their subsequent employee actions which shocked the travelling client base.

Bruno's investing strategy encourages public companies to discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate, to determine which CSR or sustainability initiatives they should address, and to find the most effective ways of doing so.

Follow On Twitter @Jacolineloewen

What is the ROI of Golf?

 

For me, golf is hard. I only started playing a few years ago, primarily for business, and just when I think I am getting bearable on the golf course, the season ends. When I watch the professionals play - like Annika Sorenstam - they make it look easy. Annika swings her club and her ball goes exactly where she determines it should go. I watch her play to get some tips for myself and dream that my ball could also glide across the green and thunk into the hole. Annika has recently stepped down as #1 top female ranked golf player. Her ROI on golf has been substantial - world class and a huge draw for TV viewers and golf enthusiasts.
Annike has dedicated herself to the game and is an expert. This means her game is predictable and you can be confident she will be the top of her category. Those few feet between my attempts at getting  the ball in the hole and Annike's are actually worth a great deal of money - the ability to win world championships and making an income from playing the sport.
My ROI for golf is a lot of fun, getting out in the sunshine with friends and getting to play with business colleagues who cheerfully put up with my lack of competence.
What is your ROI on Golf?

Should children be taught in school how to become wealthy?

Do you think schools should be teaching their students how to become wealthy? It is a teachable subject, just like driving a car?
Last week, our team visited a high school for Junior Achievement to talk about becoming wealthy which is actually achievable for every teenager who was listening in that classroom. There you have it...everyone who was listening. It was shocking to have rude comments made by the teens to the team.
Yup. Unbelievable. Unless you are a teacher...
Wealth, I believe, starts at home. Attitudes of these smarty pants kids starts at home.
Do you think they will be a client of a financial advisor in a few decades? When they had the privledge of hearing from client advisors who handle millionaires' money, they needed to realize the impact on their future lives. Most of our clients made that money themselves and also were teenagers but often their stories illustrated their dedication to learning.
When I calculate the cost of salaries and bonus of our team, plus their good will and energy put forward, I wonder about the worth of such an outreach program.
What do you think?

Pierre Ouimet and Jacoline Loewen

From our magazine, Unlimited, I read the views on teaching wealth in schools made by Finland's Minister of Education:

Dr Marjo Kyllonen is the Education Manager for Helsinki. Having devised the blueprint for the future of Finland’s school system, she is playing a pivotal role in driving these changes through. She is doing so because she sees the structure and aims of current education systems in the West as increasingly irrelevant and obsolete, relics of an Industrial Age that we started to leave behind a long time ago. She argues that we need to rethink our entire relationship to education to equip future generations with the tools they need to face the challenges to come.

Do you think we should give much priority to teaching children how to become wealthy?

No, I don’t think that’s the role of the school. Of course, we’d like everyone to have a good life and be successful. But the way you’ve put it makes me think of a world where individuals are looking out for themselves – a “me first” culture. My picture of future society is totally different – I think people need to have social responsibility and understand that no one is doing well if there are others in society who are insecure and suffering.

What should our legacy be to future generations?

It’s not only us and our kids, it’s our grandchildren and their children – if we want our little human “club” to survive in the future we really have to think: what is sustainable? And how do we teach that to our kids? Not only ecological sustainability – social sustainability, too.

If you could change one thing about the way politics on Earth works right now, what would that be?

My friend, the former NASA astronaut Ellen Baker, told me that when she was in space, she saw how beautiful our world is. And there are no boundaries. Go far enough away and Earth looks very peaceful, no borders. She said to me that our politicians should go and have a space-trip, to see how beautiful our planet is and make peace.

M&A Fee Guide: Industry Survey Results

Mergers and Acquisitions Fee Guide: Industry Survey Results and Findings.

The most comprehensive study on lower middle market Mergers and Acquisition advisory fees.

By: John Carvalho

Recently, Firmex and Divestopedia partnered to provide transparency into Mergers and Acqisitions  fee structures within North America. Their goal was to research fee structures charged for Mergers and Acquisitions by finance experts.

Currently, no mainstream published data exists that offers both buyers and sellers insights into average cost structures, what’s being charged and why. This survey actually is very much needed to help business owners understand why they need the services of finance experts beyond their accountant and what services the fees support.

Here is a link to the M&A fee survey report:

https://www.divestopedia.com/14/8102/sale-process/investment-bankers/ma-fee-guide-industry-survey-results-and-findings

If you want to get in touch with the author:

John Carvalho, CA, CBV, CF

President

Stone Oak Capital Inc.

www.stoneoakcapital.com

The survey ran from August through to the middle of October 2016 with 320 responses.

Are Women Entrepreneurs Changing How We View Wealth?

Are Women Entrepreneurs Changing How We View Wealth? Jacoline Loewen asks how investing is changing?
https://www.ubs.com/microsites/global-visionaries/en/visions/analisabalares.html

Are Women Entrepreneurs Changing How We View Wealth?

Xenia Bogarad, Lally Rementilla, Jacoline Loewen,
Leslie Gouldie, Elizabeth Suske, Maira Milanetti

Imagine my surprise when I looked at the UBS Unlimited social networking site and found the leading article was about my friend Vicki Saunders featured as the UBS Wealth Question – Are women changing the way we see wealth?  I was surprised because UBS has the choice to feature any successful woman around the world through the UBS  supporting women initiatives. They chose to shine the spotlight on a great Canadian entrepreneur - Vicki Saunders.

Vicki and I are on OCAD University's business catalyst advisory board together and we share a common interest in being passionate about supporting entrepreneurs. I have always admired Vicki's ability to get traction for female entrepreneurs. Just as UBS discusses in this article, Vicki is changing the definition of wealth with VC investing. Here is the UBS article talking about wealth and VC investing:

Vicki Saunders came to start the SheEO because she saw that current funding models for young women entrepreneurs were broken––not only were women receiving just 4% of venture capital, but economic models optimized for growth at the expense of everything else disadvantaged women. Here is an excerpt from the article:

“What I have seen is that from a VC [venture capitalist] point of view we look at women and see all the things that are wrong with them,” said Vicki when I spoke to her, before listing many of the gendered criticisms she’d heard while working in Silicon Valley: “women aren’t bold enough; women aren’t confident enough; women don’t take enough risks…” Vicki, however, turned the meaning of these insults upside down; what she heard instead was that women don’t overpromise on what they can deliver, that they do what they say they are going to do. Studies have shown that women often extract more value and profit from capital than men, giving Vicki the confidence to pursue SheEO.

Surveying the state of our economic system, Vicki argued it was time for a change. “What if we were optimizing for wellness, or for quality of life? We made up this current model, and it is no longer working for us, so we need a new one. Providing women with funds and a network is the best way to bring that about.”  

In my view, Vicki Saunders took the criticisms of women entrepreneurs and understood there is a flip side to look at women’s qualities. She had seen the perspective of many women entrepreneurs and this experience gave her the confidence. She is now helping women across the world create wealth. Women need to be the change they want to see and Vicki shows that my favourite saying is true - action speaks louder than words.

UNLIMITED* is a new venture powered by UBS, bringing together – from across geographies, sectors and backgrounds – a unique, global network of people in search of the answers to life’s big questions. By working in partnership with innovative content partners including Monocle, The Future Laboratory and VICE, UNLIMITED* will provide a completely fresh perspective on topics that are truly significant, through our distinctive curious approach.At UBS, this is what we do everyday. We work with an extraordinary group of entrepreneurs and investors, and we use our scale as the world’s largest wealth manager to help answer life’s big questions to ensure our clients succeed. You can also join Jacoline Loewen on Twitter @jacolineloewen

The Atmospheric Fund invests in Sustainable Businesses

TAF Board of, Directors: Jason Kotler, Susan McLean, Jacoline Loewen, Keri Diamond, Mik Layton 

The impact of investing in sustainable business is now asked about by investors. This has been the mandate for The Atmospheric Fund (TAF)  and its investments. The TAF mandate is to reduce air pollution and greenhouse gas emissions in Toronto and GTA, supporting the City of Toronto’s target to reduce city-wide emissions by 80 per cent by 2050. TAF invests its endowment based on a Council-approved investment policy overseen by a blue-chip volunteer investment committee.

"Now celebrating its 25th anniversary, TAF was the brainchild of a City Council led by Mayor Art Eggleton which created the agency in 1991 and endowed it with $23 million from the sale of surplus City property. TAF has invested the capital ever since, using the returns to seed innovative projects, advance game-changing policies, and demonstrate and de-risk low-carbon solutions to help the City achieve its ambitious climate targets. The endowment has been invested three times over supporting over $50 million in community grants and investments and shaving $60 million off the City’s operating budget. All this at no cost to the taxpayer.

What are the two lessons Canada’s senior governments can learn from TAF’s success?

First, a strategic focus is essential. TAF produced Toronto’s first GHG inventory which revealed waste as a key source of emissions. As a result, Toronto became one of the first cities in the world to capture methane leaking from landfills and turn it into green power, simultaneously shrinking a major GHG source and creating a new revenue stream.

Second, seeing is believing. The adoption of new green technologies or programmatic approaches carries inherent risks that are more appropriately advanced by an independent innovation group like TAF. If a new initiative fails, municipal staff who champion the innovation may fear being sidelined. Pilot projects designed at TAF to test and verify results de-risked new technologies. Thus, a wide variety of advanced technologies have been adopted across the city, from industrial wind and solar electricity generation at Exhibition Place, to LED traffic signals, to electric vehicle adoption in Toronto’s fleets." Read the full article here.

Julia Langer, CEO of TAF, said it was wonderful to have so many current Board members of The Toronto Atmospheric Fund attend the TAF@25 celebration.  There were about 400 people in the room from the business, technology, finance, environmental and government sectors demonstrating TAF’s broad network. 

Sandra was an excellent emcee, and thanks to gamesmaster Mike Layton for making the carbon poker game a hit.  

Above all, thank you to the CEO of TAF, Julie Langer, who leads with passion but also great organizational ability.

Please find our TAF celebration press release here and see highlights from Twitter here. 

Why private equity appeals to wealthy families

There is a growing interest in investing into private equity amongst wealth families with over $10 million, particularly those who made their wealth through running operating businesses themselves.

"We’ve noticed that private equity typically resonates very well especially among those families who generated their wealth by running operating businesses themselves," observes Martin Pelletier, Portfolio Manager and OCIO at TriVest Wealth Counsel Ltd, in the Financial Post, 27th September, 2016.

Pelletier goes on to quote from the most recent UBS Global Family Office Report: "We are not alone in this observation as the 2016 Campden Wealth-UBS Global Family Office Report highlights that the average family office has a 22% portfolio allocation to private equity. Approximately two-thirds of this is done through direct and co-investing rather than private equity funds. This makes some sense as it provides more control over the investment process and families can better utilize their previous hands-on business experience." (Read the whole article here.)

Wealthy families who have run their own operating companies have a comfort in understanding the due diligence required to get a grasp of the business and why capital needs to be tied up for a long time period. They also understand why there is also a higher risk premium for illiquid exposure expected to generate higher returns over the long run.

One caveat for those interested in private equity is that access to quality private equity deals is the critical requirement to achieving the returns to cover the higher fees.

Jacoline Loewen, UBS Bank (Canada), author of Money Magnet: How to Attract Investors to Your Business, (Wiley). You can follow Jacoline on Twitter @jacolineloewen

Boring the way investing should be

Mawer Investments Jamboree 2016 and Jacoline Loewen

What a great evening hosted by Mawer Investment Funds who ran a Calgary style jamboree for the Make a Wish Foundation. Mawer have as their tag line for their business: be boring, make money. It is true that Mawer funds are rated well but their style of entertaining for a good cause is far from dull.

Boring: The way investing should be

Before I got into the wealth management business, I was working in corporate finance and trying to get companies to sell to private equity. That was definitely exciting, and the returns were double digit or zero - really exciting. Now that rate of return sure is thrilling to vision but the downside is not as attractive.
I have since learned that keeping a large pool of your investments in safer pools of investments is actually the main target of wealth management, which does mean lower returns than Venure Capital investing. Those private investment,double-digit returns can still be attained by using small capital investments which will not break ou if you lose the entire deal. You can still have the excitement of investing in early stage entepreneurs without betting the house.

Short term combined with long term

It is sort term and long term thinking combined.
So think about what is exciting as a potential investment - go ahead. Discuss it with your friends at the golf course. Then think long term. Do you have an income stream from your investments until you are a 100 yars old? After that, by all means, beat on the next business investment your buddy shows you. Your family will thank you for sticking to that long term outlook though.

Boring the way investing should be

Mawer Investments Jamboree 2016 and Jacoline Loewen

What a great evening hosted by Mawer Investment Funds who ran a Calgary style jamboree for the Make a Wish Foundation. Mawer have as their tag line for their business: be boring, make money. It is true that Mawer funds are rated well but their style of entertaining for a good cause is far from dull.

Boring: The way investing should be

Before I got into the wealth management business, I was working in corporate finance and trying to get companies to sell to private equity. That was definitely exciting, and the returns were double digit or zero - really exciting. Now that rate of return sure is thrilling to vision but the downside is not as attractive.
I have since learned that keeping a large pool of your investments in safer pools of investments is actually the main target of wealth management, which does mean lower returns than Venure Capital investing. Those private investment,double-digit returns can still be attained by using small capital investments which will not break ou if you lose the entire deal. You can still have the excitement of investing in early stage entepreneurs without betting the house.

Short term combined with long term

It is sort term and long term thinking combined.
So think about what is exciting as a potential investment - go ahead. Discuss it with your friends at the golf course. Then think long term. Do you have an income stream from your investments until you are a 100 yars old? After that, by all means, beat on the next business investment your buddy shows you. Your family will thank you for sticking to that long term outlook though.

Christine Lagarde talks about Canada and the IMF

Christine Lagarde and Jacoline Loewen in Toronto 2016

It was an honour to spend time with Christine Lagarde, IMF, and hear her views on the world and the future. She touched on many topics such as Brexit, China and women in finance. She was also highly complimentary about the Canadians she had met and our finance ministers (she has worked with three ministers of finance).

The event was on the front page of the Financial Post:

Christine Lagarde, who spoke at an event hosted by The International Economic Forum of the Americas in Toronto Monday, said that the backlash against globalization represents one of the biggest threats to the global economy.

“Those who suffer from globalization need to be helped along the way, we cannot just have growth that benefits some and leaves many without skills, without retraining,” she told the audience.

“The first thing that is needed is to have some growth — my grandmother used to say that everything is better with butter,” said Lagarde. “If you have more growth, you can deal with your debt … more jobs are being created, it’s much easier.”

What is wealth management

Wealth management is a common term used by financial advisors in front of their clients, but is it understood? Most clients with portfolios over $2 million in accumulated wealth may be surprised to learn what is available to them now that they are millionaires. 

Jacoline Loewen, Business Development for Wealth Management

Forrbes magazine had a good article asking the question: 

What is wealth management?

Wealth management is very straightforward. From the affluent individual’s perspective, wealth management is simply the science of solving/enhancing his or her financial situation. From the financial advisor’s perspective, wealth management is the ability of an advisor or advisory team to deliver a full range of financial services and products to an affluent client in a consultative way.

Specialized expertise

Theoretically, a wealth manager can provide every single financial product in existence.  In reality most wealth managers specialize in services and products they have experienced. This is where a large wealth manager will be able to offer a more diverse service and be able to call in the expert teams around the different products sch as hedge funds, ETFs or structured products or PPNs.

It all starts with you

A further defining quality of wealth management is that it is delivered in a consultative manner. By being consultative, wealth managers are truly client-centered. A good wealth manager meets a client without any presupposition about what financial products or services are appropriate for that affluent individual.

While it is common for a wealthy individual to be sitting with a wealth manager to address a particular need (investment management, say), the consultative wealth manager’s overriding objective is to understand the person and find out what’s important and why. Then the wealth manager is able to bring in the appropriate experts and provide the appropriate financial products.

You can follow Jacoline Loewen on Twitter: @jacolineloewen

The 4 questions to maximize your business valuation

Profits are returning and owners interested in selling their businesses are watching industry cycles like hawks looking for the upswing, waiting to get the timing right. A critical question for these owners is “where is my own business in its cycle?”

Jacoline Loewen Director of Business Development 

For any business owner contemplating a sale in the next year, here are a few additional quesions to ask to boost their business valuation to increase their wealth after selling:

Does your business have solid management?

The owner may be leaving but buyers want to know whether there’s a team in place with big goals to drive the business forward with equal determination. Having a succession plan is critical, but it is estimated that fewer than 5 per cent have a written document with a strong operator or family member ready to take over. Owner-operators have built their lives around running their businesses and they do not want to let that go. This reluctance may prevent them from seeing the importance of planning for their own exit and they will get dinged on their company sale price for this omission.

Are your key processes institutionalized?

“There is the risk that the company incurs a fatal loss of knowledge and connections upon the exit of the owner,” the president of a manufacturing business told me. “The earn-out helps, but two to three years does not make up for 30 years experience in a company. One way to mitigate this risk is to bring in a guy like me.” Paying a high-quality CEO for a few years will help the owner of a windows manufacturer convert “in the head” knowledge to written processes. “We preserved the knowledge and demonstrated the existence of a reliable management team to a potential buyer,” the president added.

Do you know good buyers?

The sale price of a business is what buyers offer and when a company is in the growth part of its business cycle, there will be multiple offers and phone calls from all sorts of interested parties. “I know the ‘I’m comfortable with my business’ owners where the offers to buy have made great sense,” says succession planning coach Janice Lahiti . “The owners don’t do it because they think their ability to influence a variety of broader agendas will diminish.” As the business hits the mature stage of its life cycle, which often occurs in tandem with the owner’s life cycle, suddenly the pool of multiple bidders dries up and as Janice says: “The owner can no longer command the multiples they want.”
The owner may also miss the opportunity to sell to a buyer who will structure the sale so that the majority of the company is purchased but the owner can keep 20 per cent to 30 per cent with a fixed medium-term buyout schedule. They can also have limited management or board involvement. This structure keeps the owner involved mentally and financially in his or her ‘baby’ while taking some money off the table to free up time to pursue other interests.

What is your opportunity cost, really?

Melanie Kau exited her successful family business, Mobilia, to take on the challenge of running Le Naturiste. “The ‘what next’ after you have worked for 15 to 20 years in a business prevents people from asking themselves the cost of staying where they are because they are comfortable. I know what that feels like because I have just been through it. Therein lies a great deal of value with the experience the entrepreneur has built up: sometimes the business is more like a cage than a platform.”
While you may not plan to sell your business today, it is certainly wise to begin thinking about that day. Careful planning now will allow you to take advantage of opportunities promptly when they materialize. With a plan in place, you will be ready to act and know if you wish to keep making your money through your business - or do a partial or full sale of the business - you do want to reap the full monetary value of your hard work.

Next column, I will address what to consider as the entrepreneur becomes a wealth manager.

Originally published by The Globe and Mail.

For more information on  UBS financial advisors - please feel free to contact Jacoline Loewen.
Jacoline Loewen is director of business development of UBS Bank (Canada). She is also author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.

Canoes, Housework and Hedge Funds

It’s that time in the summer to get in a canoe and head out across the lake.  How much more enjoyable when you know as you paddle peacefully, your wealth is organized securely for the long run?

Business owners have generally built their wealth by excelling in their chosen fields rather than through any particular investment expertise. While many of these self-made millionaires understand the importance of saving and investing for the long run, recent research by UBS Wealth Management Americas discovered that some have limited financial acumen on specific concepts and terminology.

For example, three out of ten understood the term “basis point” or “beta”. Six out of ten understood market capitalization. Seven out of ten understood liquidity.

What’s more, these self-made millionaires choose not to learn more about investing. The UBS Wealth Management research noted that these entrepreneurs rank researching and managing investments dead last on a list of how they choose to spend their time, even behind housework.

The millionaires cite information overload as one of the reasons for their disinterest. For example, researching hedge funds could leave entrepreneurs confused as they have a controversial history since they began to grow in popularity after 2001. Yet the traction of investing in specific hedge funds lies in their flexibility to pursue strategies not open to mutual funds or segregated funds. Having your own hedge fund or being part of a pool can bring a unique advantage. In addition, research on hedge funds will show that it would be too difficult to replicate the strategies as an individual investor because they would be prohibitively expensive and logistically impossible. What a pity to miss out on a valuable investment opportunity because of lack of expertise.

Ultimately, millionaires generally recognize their constraints and choose to work with a financial professional.

What does build confidence for these business owners? Our research shows it is the principle of financial discipline: setting specific objectives, developing a plan and sticking to it.

With your financial plan done and working with a UBS financial professional, you can have the peace of mind to get in the your canoe and relax on the lake this summer.

For more information on the UBS Wealth Management Americas survey, to request the full research report, or to find out more about UBS financial advisors - please feel free to contact me.

Jacoline Loewen is director of business development of UBS Bank (Canada). She is also author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.