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Illustrations by Don Sparrow

Meet the Dilby family and Dilby & Sons Construction, founded in 1957.
Five family members own shares in the business:

Everything was falling into place at the start of the year. Negotiations were going well with the sale of the construction business. A number of family issues that had hampered prudent business decisions had subsided. Then covid-19 hit. The potential buyer stepped away from the table, having lost his appetite for aggressive expansion. The Dilbys and their businesses were adrift in the pandemic sea of uncertainty. What now?

Ian Braaten, who spent summers working on the family farm, says the Dilby situation reminds him of the end of harvest season, when the machine shop is a mess and needs some serious attention. “It’s the right time to clean up shop, take inventory, and get organized so you’re ready for the next busy season.” Braaten is a partner with KPMG Enterprise, dedicated to private enterprises. He recommends that the Dilbys do a 360 Diagnostic, a free service that examines the different aspects of business such as tax planning and corporate structure.

For example, when the failed buyout offer was made, the Dilbys were actually not in the best position to sell, something a pre-sale Diagnostic would have clearly revealed. Looking to the future, to meet the retirement needs of the elder Dilbys, one option identified would be to move the office building housing the construction business, and owned by the Dilbys, to a new legal entity so it could then be retained by John Dilby and rented back to new owners. That would produce additional ongoing income for the senior Dilby and his wife, over and above the proceeds from the sale.

The Diagnostic would also look at financial reporting, which the Dilbys have been unhappy with for some time. Delays in filing tax returns on some of John’s American interests last year cost him a interest and penalties of over $10,000 imposed by the US Internal Revenue Service. Greater accuracy and efficiencies in financial management throughout the Dilby companies would also yield reliable data that could uncover wasteful practices in other areas. In the case of Annette’s company, during the years of rapid growth much of the focus was on making money, without regard to where money was being wasted. Identifying and eliminating those incremental losses are now critical to the survival of Annette’s business.

Experts have predicted that the majority of businesses coming out of the current covid pandemic will not reach the same level of success they experienced going in. It’s a reality not wished for, but certainly to be prepared for. Fortunately, Dilby Construction bid successfully on a substantial contract and looks forward to rehiring most of its skilled workers. Annette has shifted to doing major custom home renovations for upper-income families who have decided to upgrade their homes rather than, for example, buy a lake-front cottage.

For Julian and his fly-in fishing camp, the story is much different. Travel restrictions have prevented the annual return of his lucrative corporate guests, especially those from the United States. The precarious financial situation is beginning to increase tensions between Julian and his brother Jacob, who doesn’t like the fact that if Julian fails in his obligations to the bank, the construction business will be liable for the losses. With professional assistance, each of the Dilby businesses could be restructured to address serious issues such as cross-liability, which could hurt not only the business, but also family relations.

The Dilbys, like thousands of other business owners, realize how important IT has become in 2020. In a state of near-panic and with no prior research, the Dilbys bought 30 laptop computers on a Monday morning just after self-quarantine restrictions went into effect, hoping this would ensure their key employees could work effectively from home. But that snap decision also meant they had to take stop-gap measures to keep their IT system from overloading. Now they are finding that many of their employees are hesitant to return to the workplace, preferring instead to continue working from home. Furthermore, even when the pandemic lifts, it is obvious that the old days of the loyal employee coming to work even when sick are over. Even the slightest symptoms of a cold or flu will force employees to stay at home, but they may be able – if properly equipped – to still get their work done without jeopardizing the health of their co-workers. A thorough examination of the Dilbys’ IT system and requirements is essential to meet these challenges.

“The COVID-19 pandemic has forced many businesses to find better and different ways to succeed,” says Braaten. Today, the key to survival is the ability to adapt. With the aid of a thorough diagnosis, the Dilbys might find out how.

All names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), businesses, places, buildings, and products is intended or should be inferred.

First published in the September 2020 edition of The Business Advisor.

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Hi-Tec Profiles is a custom metal fabricator. With 80,000 square feet of facilities and 60 full-time staff, the company often works as a subcontractor to other Saskatchewan-based manufacturers. Trent Meyer, Hi-Tec’s president, and Jeff Linner, a partner at PFM Capital, recently discussed PFM’s investment in Hi‑Tec.

Why did this deal make sense?

Jeff: Hi-Tec’s two founding partners were looking to retire when we were first introduced to Hi-Tec in 2011. They had a strong management team that was running the business. The thing we really liked at the time was that it provided a wide range of industrial exposure rather than manufacturing a single product. We also liked that the company provided sustainable and attractive cash flows.

What was the nature of the investment?

Jeff: Ultimately, the founding partners gave us an opportunity to take 50% ownership. The management team owned the other 50%. We’ve now increased our ownership to 65% as some of the management team retired. Trent joined the ownership team two years ago when he was hired as president.

Trent: From my own perspective, becoming a partner in the business was an attractive opportunity. It was something I had always wanted to do and it was important for PFM to make sure our interests were aligned.

What is it like to work with a partner that owns more than half the company?

Trent: As someone coming into a leadership position, it was clear to me that PFM knew the company inside and out. They were straight about the situation and there were no surprises. The succession went down the way we hoped it would.

Jeff: We’re often asked how much we get involved in a business. Ultimately, we find that management keeps calling us for advice.

Trent: PFM is not an operator. They’re an investor. They expect performance. They expect me to communicate with them. And they expect me to take care of the business. I get the support that I need but I don’t have to report on the minutiae. I’m able to make quick calls on important things. If I’m facing a situation that I don’t have experience with, PFM has invested in lots of companies and they likely have seen something like this before. So we have discussions and come up with a plan.

What is it like to work with a partner that is a source of long-term financing?

Trent: I’ve had some sleepless nights as we work through challenges and a few opportunities. But that’s what I signed up for when I bought into Hi-Tec. Some decisions I have to make do not have an obvious correct path forward. PFM is in this for the long term, and Jeff and I can talk through it and come up with a mutual vision for what needs to happen.

Jeff: One of the things in our model is that we don’t have a set timeframe for ownership. So with Hi-Tec we spent the first seven years harvesting cash flow. Recently, it became clear there were emerging opportunities for the business and so a decision was made to invest in new equipment. We’re working with management as they consider how to expand, whether through complementary product lines or new markets. We are willing to support the company as it prepares to grow.

What advice do you have for owners who require capital?

Trent: It comes down to the capacity of the existing people to run the business. You have to be prepared. Companies don’t often have a successor. There are a lot of fantastic companies that have nobody left to run them once the owner retires. If you see yourself exiting the business in five years you have to start cultivating that relationship with a private equity firm now. They can bring someone in to run the business but it takes time to put a deal like that in place.

Jeff: When considering a sale to a private equity firm, consider what type of people they are and how they make decisions. That defines the kind of relationship you’re going to have down the road. It’s important if the exiting owner retains an interest or if they care about the future of the business and the employees.

Trent: Absolutely. Get to know the investor. Understand their expectations. You need a level of trust. Things might not always be easy, but you want your partner to be fair.

Interview has been edited for brevity and clarity.

First published in the September 2020 edition of The Business Advisor.

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Although women entrepreneurs generate a sizable portion of Saskatchewan’s economic output and job creation, there are barriers holding women back from contributing even more to the health of our provincial economy. But work is being done to eliminate these obstacles.

Barriers to growth

Women-led businesses tend not to scale up as quickly or as much as businesses led by men do. This is because women face unique barriers such as lack of access to capital, mentors, networks, and several other factors,[1] as identified in a 2018 study that examined national data on entrepreneurship among women in Canada.

Prabha Mitchell, CEO of Women Entrepreneurs of Saskatchewan (WESK), feels the barriers have multiple implications. “[Breaking down] barriers that prevent women from scaling up their businesses is not only a social and moral imperative; It is also an economic issue. Saskatchewan faces a lost economic opportunity.”

Businesses led by women represent a significant portion of the province’s economy. WESK commissioned a report, prepared earlier this year by PWC, called Women Entrepreneurs in Saskatchewan. It showed that women entrepreneurs contributed $23.1 billion in GDP to the provincial economy in 2019 and created 192,000 jobs. However, there is a disparity between businesses led by women and those led by men. Women-led businesses make up over 80% of companies with fewer than 10 employees. This proportion decreases as the size of the business increases. Women-led businesses tend to have lower revenue and smaller asset bases. The findings also suggest that women-led businesses are more concentrated in the lower-productivity and less technologically oriented sectors of the economy.

The Saskatchewan government’s long-term vision for growth projects 100,000 more jobs within 10 years. Women-led businesses will contribute significantly to reaching the province’s goal and this contribution could be even greater with the mitigation/elimination of barriers to growth. The province’s growth rate will be hindered by these roadblocks that women-led companies face.

 Supporting entrepreneurs

All entrepreneurs need support. Running a business is hard. Founders of companies need new skills as their businesses evolve, particularly when a business is in a period of growth. They need support from people who have been through similar experiences, they need access to capital to fund their growth, and they need connections with people who could be suppliers, customers, and industry peers. The same situation exists whether the entrepreneur is male or female. What is different is that women face unique challenges that limit access to these aspects that enable growth. That is the entrepreneurship gender gap.

In May of this year, the provincial government announced the creation of a WESK-led advisory committee to prepare recommendations that will enhance the business climate and help enable women entrepreneurs to scale up their businesses. This committee is addressing the gender gap in entrepreneurship head on.

The committee has just released a report titled Enabling Scale in Saskatchewan[2]. The report contains four recommended actions for impact; enhancing access to capital, developing scale-enabling policies, streamlining access to data, programs and networks, and enhancing awareness and support by building momentum.

The Saskatchewan Advisory Committee worked with data from the 2020 PwC report to develop these recommendations for removing barriers. Given that 80% of women-led businesses have fewer than 10 employees, one key recommendation is to tailor programming and supports to help smaller women-led businesses scale up to a larger employee base. This is particularly important given that women-led businesses tend to be more labour-intensive and therefore have a greater ability to create jobs.

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As part of the efforts of WESK and the Saskatchewan Advisory Committee to address the gender gap in entrepreneurship in Saskatchewan, WESK commissioned PwC to estimate metrics that describe women’s entrepreneurship activity in Saskatchewan: the number of businesses with employees, the number of employees, revenue, sectors of operations/business activity, location, ownership type, majority women-owned and women-led businesses, and aggregate economic contribution.

Download the full Women Entrepreneurs in Saskatchewan: Economic Statistics report, published in May 2020

One way to understand the importance of the committee’s recommendations is to consider an example of someone who has experienced success. WESK recently presented Katherine Regnier with its Celebration of Achievement Award. Regnier founded a local technology company and has considerable success in scaling up her business. She has raised millions of dollars in capital, has successfully exported outside of Canada, and has grown her team to over 50 employees. Regnier has found a way to break down the barriers holding her back. She’s a model for other women in businesses.

Regnier reflects on her experience as a woman entrepreneur. “When I started this journey, I didn’t know how hard the mountain would be to climb. I didn’t realize how much support and encouragement, how many helping hands I would need to keep going. And last but not least, I didn’t foresee being a role model to other women entrepreneurs or being noted as one of the few women leading a tech company in Canada. But what I do know now is that it takes a community to come this far, and I feel so privileged to be receiving this award from WESK’s collection of strong women right here at home.”

Looking ahead

WESK has supported women entrepreneurs for many years through programming, mentorship, financing, and creating a vibrant community of peers. Mitchell has worked hard with her staff to help women start and scale up their businesses, acknowledging role models and promoting local success stories. A community of peers and mentors has formed, helping to engage with aspiring entrepreneurs and those who are working hard to grow their companies.

Most recently, WESK launched a new 3-year program called The Exchange which supports women entrepreneurs as they rebound from COVID-19, and then prepare to scale up operations. The program provides knowledge, tools and strategies from people who are experts in their field. It also creates partnerships with local businesses so people within the community can support each other during these periods of change.

Mitchell is excited about the work of the advisory committee. “The data in the 2020 PwC report is revealing. There is such an opportunity for women-led companies in Saskatchewan. It’s important for the business community to understand the considerable economic impact women have and the benefit of supporting women as they grow their businesses.”

The data clearly indicates an opportunity for women-led businesses to play a vital role in helping the province to reach its goals for long-term growth. Mitchell is excited about the future. “It’s right in WESK’s mission statement,” she explains. “Our mission is to close the gender entrepreneurship gap through economic and social empowerment of women in Saskatchewan.” We are passionate, zealous, and deeply committed to making progress on this. While recognizing the challenges entrepreneurs experience, we are also optimistic about the opportunities for women owned businesses with the development of the right business climate.”

[1]PwC. Women Entrepreneurship in Canada. Women Entrepreneurs of Saskatchewan, Oct. 2018. https://wesk.ca/wp-content/uploads/2018/10/WESK-Report-Oct.-15-2018-PwC-1.pdf

[2]WESK. Enabling Scale in Saskatchewan: Report of the Saskatchewan Advisory Committee on the Gender Entrepreneurship Gap. July 2020. https://wesk.ca/wp-content/uploads/2020/07/Enabling-Scale-in-Saskatchewan_July_27.pdf

First published in the September 2020 edition of The Business Advisor.

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… you recall that we are social animals. Touch is the first sense we develop and it’s a secret weapon for building relationships. When you meet face to face, break bread together, and share a space, you make a special connection. It builds trust. And there is science to prove it.

Research published in the Journal of Cognitive Neuroscience supports what many of us already experience[1]. The simple act of shaking hands touches neural circuits inside the brain that create a predisposition toward positive feelings, competence, and trustworthiness – all things we work hard to build in a business environment. That study, led by Sanda Dolcos of the University of Illinois, individuals were shown video clips of two people meeting in a business interaction. When the meeting started with a handshake the observers judged the host as more competent and trustworthy.

This test was also conducted while the observers were in an MRI machine. Here’s what was happening in the brain. A part of the brain called the nucleus accumbens was activated when the meeting started with a handshake. The nucleus accumbens is an important piece of the reward pathway that is linked to positive experiences such as excitement. Shaking hands makes someone more excited about working with you. Shaking hands makes you appear more competent. Shaking hands builds trust.

But what about team building and team performance? In another study (focused on touch as a whole), a team led by psychologist Michael Kraus (also from the University of Illinois – clearly a pretty touchy-feely place) tracked physical contact between teammates during NBA games[2]. The study revealed that the more on-court chest bumps, high fives, and backslaps there were early on in the season, the more successful the team and players were by season’s end. The effect of touch was independent of salary or performance. In fact, according to Kraus, touch predicted performance across all NBA teams.

But today touch has become a challenge. Certainly, we need to have permission before shaking hands, and absolutely, it needs to be followed by handwashing for 20 seconds with soap and water or some hand sanitizer. This will be a new business ritual that organizations will need to adopt. But all of this assumes that you are in the same room, let alone the same city, as your customer,
supplier, or colleague. You have to get there. But how?

Business travel was exhausting even before all the new hoops we have to jump through because of the covid-19 pandemic. Now there are masks, new aircraft loading procedures, and social distancing. There is also the realization that you are sharing the airport with the other 50,000 people who visited today. And that’s before you even get on the plane. The plane is a closed
environment shared with hundreds of strangers. The team you want to meet are important, but getting there has never been more difficult.

SHAKING HANDS BUILDS TRUST AND MAKES SOMEONE MORE EXCITED ABOUT WORKING WITH YOU. HOW CAN YOU SAFELY TRAVEL TO BUILD THOSE CRITICAL CONNECTIONS?

Flying privately is a different experience. To start with, it does not begin at a major airport. Flights leave from a local fixed-base operator (FBO) terminal. FBOs are for private aircraft. That means fewer people and a smaller area, so it’s easier to maintain a high standard of cleanliness. Drive up to the FBO, leave your keys, meet the pilots, and away you go. No need to arrive hours before departure. Arrival time is the time that best suits your busy life. Not according to the airline’s schedule. According to your schedule. What is best for you. The aircraft leaves when you’re ready.
The aircraft is yours. You share the plane only with the people you invite. No worrying about hundreds of other passengers. No distractions. The time is yours. Time to focus on the task at hand and preparing for the meeting. Or you can socialize with co-workers and learn more about their families. Or just relax and allow your mind to wander and think….Oh, the thinks you can think!

The feeling of arriving at your destination refreshed and ready for the day is standard in private aviation. Your alarm doesn’t have to go off while it’s still dark out unless that’s your style. You won’t have to drive around looking for parking. Instead of sneaking out trying not to wake up the family, enjoy breakfast at home before you go. Or relax over coffee at the FBO – there’s never a lineup for coffee in an FBO. And there is no commercial “aviation hangover”.

This passenger-first approach is not new for the private aviation industry. Taking care of people is the root of any law or regulation in aviation, one of the most highly regulated sectors. Our experience at airports changed as a result of 9/11 and has now become even more restrictive with the covid-19 pandemic, but the changes are in support of safety. Pulling onto the shoulder is not an option, so every aviation operator, whether commercial or private, signs on the dotted line saying they will follow the rules and check the boxes. We are all accountable for slowing the spread of covid-19. Being responsible goes beyond having to follow regulations – the private aviation industry doesn’t simply take care of people because it has to; we want to.

Humans create rituals, take action, and make decisions in interesting ways. Instinctually, we want to end a meeting with a handshake. Have you noticed that at the end of a Zoom video conference we wave goodbye? Why is that? I never waved goodbye before. But there I am, like a little kid, waving goodbye. Trust is important. We make decisions emotionally and when the stakes are high
you need all the tools you can get at your disposal. Your superpower is your handshake. Your secret weapon to get you there is private aviation.

1 Sanda Dolcos, Keen Sung, Jennifer J. Argo, Sophie Flor-Henry, and Florin Dolcos. “The power of a handshake: Neural correlates of evaluative judgments in observed social interactions,” Journal of Cognitive Neuroscience 45 (12), Dec. 2012, pp. 2292–305.

2 Michael W. Kraus, Cassey Huang, and Dacher Keltner. “Tactile communication, cooperation, and performance: An ethological study of the NBA,” Emotion 10 (5), Oc.t 1, 2020, pp. 745–49. https://experts.illinois.edu/en/publications/tactile-communication-cooperation-and-performance-an-ethological-

First published in the September 2020 edition of The Business Advisor.

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“Yes, she really did say it,” said the CFO as she began filling her glass from the water cooler. “She told the entire crowd that she had been discriminated against because she was a woman.”

She took a sip from her water glass and began to smile. The CFO was speaking to a younger co-worker and was recalling what she had heard at an event one year ago. The young woman was hanging on every word. The CFO garnered a great deal of respect, but the younger woman was intrigued for a different reason. She had heard about this event before. Lessons I’ve Learned is hosted annually by the NSBA and is a bit unique in the business community because people speak openly about their experiences as business owners. This scene being described, however, was unexpected.

Just then another employee walked into the lunchroom. The CFO looked at him and said, “Remember the NSBA’s Lessons event last year? “His eyes began to sparkle and he broke into a wide smile. “Absolutely!” he replied. “Christine really wasn’t afraid to call a spade a spade.”

“Christine?” asked the younger employee. “I thought her name was Brenda.”

“No,” corrected the CFO. “Brenda Nowakowski was who I was talking about, but Christine Hrudka was on stage as well. She also talked about what it was like to face obstacles in a man’s world.”

The younger employee started laughing and said, “I would have loved to be there!”

“I know I learned a lot,” mentioned the man as he began filling his water glass.

The man continued, “All four of the speakers had something interesting to say. Personally, what I got most from the session was what Christine said about needing a group of peers you can rely on.
In Christine’s case, these relationships were crucial support for her. She owns some pharmacies and ended up taking on a leadership role in her industry, representing a lot of other pharmacy owners. The way she told it, she was a bit of a bull in a china shop. It was great!”

THE FOUR SPEAKERS WERE NOT THERE TO LECTURE OTHERS ON HOW TO DO BUSINESS. THEY WERE THERE TO SHARE THEIR OWN EXPERIENCES IN A HUMBLE WAY.

The small group talked for a few more minutes, recalling the varied stories that each of the speakers had shared. The entrepreneurs on stage were from different industries and had their own experiences with entrepreneurship. The CFO went on to discuss how valuable Joe Vidal’s description of international business was. That was not surprising, as the CFO had travelled extensively for the previous few years as the company expanded into new markets. “It was nice to hear someone talk about what it’s like to do business with people in other cultures. He knew what he was talking about. And he had some great stories.”

The conversation shifted to different topics discussed on stage. There were many business stories told. Interestingly, none of the speakers told the audience what to do. The four speakers were not there to lecture others on how to do business. They were there to share their own experiences in a humble way, with hopes that others could learn from their mistakes and what they happened to get right. And at times, all four also discussed their personal lives. There were many topics and a lot of great insight to absorb.

“It’s funny,” said the man. “Sometimes it’s the simple things you hear that make sense. Do you remember what Terry Bergan used to do on Fridays?”

“He’d hand out doughnuts to staff,” said the CFO.

“You bet,” he continued. “And to every employee in the building. Think about that. Imagine the personal connection you’d have with each and every one of your staff if you took time to say thank you once a week.”

“You know what struck me?” the CFO asked. “There were something like 500 people in the crowd. At one point I looked around. You know what I saw? People paying attention. It was amazing. At these large events you usually see people on their phones or talking in a small group. But everyone was watching the stage. It was a great event.”

“How did you get on this topic anyway?” asked the man.

“The event is in about a month. It’s on October 6, 2020,” replied the CFO. “This year with the pandemic they’re holding it with a slightly different format. The NSBA is hosting it in several of the large halls at Prairieland Park with lots of room between tables. So they are complying with the public health order and everyone is able to watch the event safely.”

“Really! That’s clever,” commented the man. “Did you sign us up yet?”

The CFO replied, “We’re finding out who can make it and we’ll register later today.” She looked at the younger employee she’d been mentoring for a few years. “Interested in joining us?”

The three started walking toward the door. “For sure,” she replied. “Wouldn’t miss it for the world.”

October 6, 2020 event featuring:

WAYNE WILSON

For 45 years Wayne Wilson has been creating longstanding partnerships in the commercial furniture industry, including 15 years as president of Business Furnishings.

PAM LEYLAND

Pam Leyland’s career with Rawlco Radio has taken her from weekend news anchor all the way to the top: she became president of the company in 2002.

DAN SIMAIR

Fresh from the massive success of SkipTheDishes, Dan Simair is working on an exciting new entrepreneurial venture, Pivot Furniture Technologies, which continues his business partnership with his brother, Josh.

CHIEF DARCY BEAR

As Chief of Whitecap Dakota First Nation, Darcy Bear has maintained an intense focus on community and economic development. Chief Bear celebrated 25 years as Chief in 2019.

Lessons I’ve Learned is a celebration of business and professional people in our community – of how people grow by learning from others who can relate to their experiences. It is this unique and compelling connection that has made Lessons I’ve Learned one of the most popular events of the year. There are lessons to be learned, stories you won’t want to miss!

For more information please contact the NSBA office.

First published in the September 2020 edition of The Business Advisor.

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Saskatoon Real GDP

The city’s GDP fell 1.2% in 2019 and is expected to retreat a further 4.9% this year as a result of the covid-19 pandemic and weak commodity prices. This reduction includes a drop of 6.7% in this year’s second quarter and a bounce-back of 2.2% in the third. Vastly better GDP growth of 5.2% is predicted for 2021.

Saskatoon Housing Starts

The Saskatoon housing market had been tepid before the current downturn. Housing starts fell to a 14-year low in 2019 and the resale market favoured buyers. Still, falling inventories of unsold new homes, low interest rates, and supportive federal programs are expected to ultimately boost residential markets and produce a modest increase in housing starts this year and in 2021.

Saskatoon Retail Sales

The retail sector, which was already struggling against competition from online shopping, has suffered major damage from the pandemic. Saskatoon’s retail sales, flat in 2019, are expected to fall by 4% in 2020 before recovering in 2021.

Source: The Conference Board of Canada. Major City Insights – Saskatoon, May 12, 2020. https://www.conferenceboard.ca/focus-areas/canadian-economics/major-city-insights/saskatoon

First published in the September 2020 edition of The Business Advisor.

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First published in the September 2020 edition of The Business Advisor.

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TAM International is a freight forwarding and logistics provider specializing in shipments of radioactive material. Based in Saskatoon, the company also has offices in Europe, India, and the US. Kurtis Hinz, TAM International’s CEO, and Johanna Salloum, a partner at PFM Capital, discuss a recent investment that PFM made in TAM.

Why did this deal make sense?

Kurtis: TAM was at a crossroads. Our founding partners were looking at retirement. Our management team entered the mergers and acquisitions process and landed with PFM. The shareholders who would manage the company kept a significant stake and were able to preserve the company’s culture.

Johanna: PFM wanted to back a strong and eager management team. We put a deal together that aligned our interests. We had confidence we’d have a really good working relationship as we move through the next few years of growing the company.

What is the nature of the investment?

Johanna: This was a management buyout. The founders of TAM had for the most part retired, had not been running things day to day, and were looking for an exit. The management team was looking for a way to have a larger stake in the company. We were able to come in and take the place of the founders and structure it in a way that provided management with more equity.

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A successful partnership requires a strong working relationship. This connection starts during original negotiations and evolves naturally over time.

Watch this video titled The Value of a Strong Relationship with excerpts from this conversation between PFM Capital and TAM International.

What unfolded after the financing deal was in place?

Kurtis: It’s like any new relationship. There are things you think you know but you don’t.. What’s been encouraging is that we’ve had an open and honest dialogue. The relationship has been really strong and we’ve had minimal conflicts. What we identified early after the close was the need to lay out the strategic plan. We had big goals for the company and needed to identify what that looks like for us. Not only having them, but what are we going to do to get them?

Johanna: The business started as a three-person operation and has grown significantly with offices around the world. We brought our oversight, where we created a board and a structure, but it did not impede your entrepreneurial strengths. It did not stop anything you planned to do.

Kurtis: The structure encouraged our entrepreneurial strengths. One of the things we realized after the close was PFM’s strong encouragement and commitment that we need to go after these things, we need to find that growth. All those things we were not sure of because of the risk and necessary capital investment – we’re now making those investments. We’ve developed better HR systems and formalized our processes, and hired strong administrative staff to help set the base for the growth.

What’s next for TAM?

Kurtis: We’re excited. We have aggressive global targets in terms of using the expertise we’ve gained in this industry, working with great companies like Cameco here in Saskatchewan that have helped us establish ourselves – our reputation – and moving all that we’ve learned in this industry around the world. That’s where PFM is there to help. If we have acquisition opportunities or if we need to make a strategic investment in certain countries, we can do that because we see growth in this industry.

Johanna: That’s what we’re here to support. Our intent is to continue to back TAM financially if there are good opportunities to invest in.

Kurtis: One of the things that helped as well is diversification. We’ve talked about it quite a bit in our board meetings. The diversification plan we’ve put together is strong and helps us ride out these global economic waves that you don’t have a lot of say in.

Johanna: A lot of companies want diversification, but you have worked through that aggressively this first year, between new geographies and new services.

What advice do you have for owners who require capital?

Kurtis: Ask questions. It can be overwhelming when you are looking for partners with capital and are in a management buyout. Also, what we came back to as a management team is that it is so important to not risk your culture. Don’t risk what got you to where you are for an extra dollar. Make sure the people investing in your company have the vision and the cultural buy-in that you have.

Interview has been edited for brevity and clarity.

First published in the June 2020 edition of The Business Advisor.

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Illustrations by Don Sparrow

Meet the Dilby family and Dilby & Sons Construction, founded in 1957.
Five family members own shares in the business:

It happens in every business – that phone call that sets you and your business on a dramatic, unexpected new course. For John Dilby, the patriarch of the Dilby business family, it came late in the afternoon two days ago, just as he was preparing to head home for the day.

“John, this is Fred Hampton. We’ve met once or twice at the annual construction convention. As you might know, my company’s been expanding into new markets across Canada, and we prefer to do it through acquisitions. I won’t beat around the bush. We want to buy Dilby Construction.” Selling the core business outright had never been part of the family discussions. Until now.

With the offer to purchase and a deadline on the table, the Dilbys have much to consider. If Hampton’s company wants to buy Dilby Construction, might there be other companies willing to make a better offer? Will Jacob, the eldest, be willing to work as a manager in a Hampton-owned company as part of the deal? How will Annette’s interests be protected? Is Julian willing to make his fly-in fishing camp his only source of income? And what about Thomas and his interests as a non-participating shareholder?

This is not an unusual scenario for Matt Duncan, Matt Duncan, Deal Advisory Partner and Managing Director with KPMG Corporate Finance. “Wouldn’t it be nice if the Dilbys could turn back the clock a few years to when they could have started discussing this possibility more calmly and rationally? That’s why I’m a big proponent of proactive strategies, rather than only reacting to situations that arise. But unfortunately, while most business owners agree that ownership transition is important, it hardly ever seems urgent enough to actually address it well in advance.”

When family dynamics come into play, ownership transition becomes more complicated. Ironically, the ease with which families can get themselves into complicated situations can make it so much more difficult to get out of those same situations. Emotions run high and relationships can be permanently damaged. Perhaps that is the most important reason of all for family businesses to put strategic long-term planning at the top of the yearly agenda, and even more reason to have a well-established relationship with an external team of professional business advisors.

“With succession planning and ownership transition in a family business, we would start by thoroughly assessing the options, by determining who wants what,” says Duncan. “We would then discuss the many different scenarios that could arise and give examples of how those situations could be resolved. Then when something does come up, such as the offer to purchase the construction business, the Dilby family is much better prepared to address it, with a much better chance that everyone will come out of it feeling that they were heard, that their interests were protected, and that the whole transaction was fair.”

Best of all, key meetings each year with well-planned agendas, along with consultations with external advisors, can put the Dilbys in a much stronger position to determine their own fate. Annette, for example, could think about and present a plan for separating from the construction business; Jacob could work with Julian to come up with an agreement to divest the fishing camp; Thomas might agree to a buyout of his shares in a way that reduces his tax liability; and John and his wife might agree to help their eldest son buy the construction company by agreeing to carry some of the debt to ease Jacob’s need for third-party financing. Without the pressure of deadlines, and with numerous options to examine, the planning process can reveal a number of pathways for each family member.

Just as importantly, careful and deliberate planning that reduces family dysfunction can play an important role in preserving the integrity and reputation of each of the family’s businesses. There is no doubt that Fred Hampton, with his aggressive expansion plans, knew that John was ready to retire, that he had health problems, and that everything was not running all that smoothly with the Dilby enterprises. He sensed vulnerability. So, too, would the employees and major customers of Dilby Construction and the other Dilby businesses. Many of the rumours might have been avoided if the Dilbys had been more proactive and had the difficult discussions earlier rather than later.

A proactive approach does not mean that everyone in the family will always be happy. A good advisor will lay things on the table, and some feelings may be hurt. But by being presented with unbiased financial models and other resources, all family members might eventually be willing to come to agreement about what is best for everyone, even if it isn’t what they originally hoped for individually. “If we can reach that point,” notes Duncan, “we are far more likely to get to the finish line without delay and get the right deals done.”

All names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), businesses, places, buildings, and products is intended or should be inferred.

First published in the June 2020 edition of The Business Advisor.

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By Ruba Qaqish

Entrepreneurs are involved in a wide range of social relationships, ranging from formal professional and business networks to informal social networks such as friendships and family ties.

This network system generates knowledge and collective learning, stimulates problem-solving, and creates business opportunities through interdependence and mutual exchange between individuals and firms.

These networks have two main characteristics:

• They are rooted in the local community.
• They diffuse information on local products, techniques, services, and markets and thus create and enforce an atmosphere of local mutual benefit and trust.

In their pursuit of adventure and growth, entrepreneurs by nature take maximum advantage of all available facilitations and opportunities. The depth of their networks allows them to exchange ideas with the people closest to them.

The fact that their networks are local enables entrepreneurs to engage in a continual process of innovation driven by the specific needs and characteristics of their local environment (the community). As a result, their products and services respond to and meet the needs of their communities.

Furthermore, the ability of entrepreneurs to be adaptable and flexible contributes to their capacity to absorb and respond to external shocks. Their inherent connection to their community makes them the first to understand the type of response needed to these shocks – and the first to respond.

Because they lack these local networks, large firms targeting large markets and economies have often been slow in making the adjustments necessary to meet the socioeconomic needs of their markets. This shortcoming makes large institutions ill-prepared to cope and contribute in times of unexpected change.

Through their close-knit networks, entrepreneurs play a vital role in their local economies. In periods of change, they satisfy the needs of the local market, stimulate business activities, and create a climate favourable to responsiveness, innovation, and recovery.

Sources:

Sergio Arzeni and Jean-Pierre Pellegrin. “Entrepreneurship and local development,” The OECD Observer 204, Feb.–Mar. 1997. https://oecdobserver.org/news/get_file.php3/id/61/file/Entrepreneurship+and+local+development.pdf.

Rachel Doern. “Entrepreneurship and crisis management: The experiences of small businesses during the London 2011 riots,” International Small Business Journal 34 (3), May 2016. http://isb.sagepub.com/content/34/3/276.

Nelson Duarte and Francisco Diniz. “The role of firms and entrepreneurship on local development,” Romanian Journal of Regional Science 5 (1), Summer 2011. https://www.researchgate.net/profile/Nelson_Duarte/publication/227490553_THE_ROLE_OF_FIRMS_AND_ENTREPRENEURSHIP_ON_LOCAL_DEVELOPMENT/links/00b7d532701114555e000000/THE-ROLE-OF-FIRMS-AND-ENTREPRENEURSHIP-ON-LOCAL-DEVELOPMENT.pdf.

Matías Mayor, Begoña Cueto, and Patricia Suárez. “Economic crisis and regional resilience. The role of entrepreneurship,” International Conference on Regional Science, University of Santiago de Compostela, Spain, Nov 2016. https://old.reunionesdeestudiosregionales.org/Santiago2016/htdocs/pdf/p1654.pdf.

Irfan Shahzad, Subhan Ullah, Kamran Azam, and Anwar khan Marwat. “Global financial crisis and its effects on entrepreneurship,”  International Review of Business Research Papers, 2010. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.563.8618&rep=rep1&type=pdf

E. Turkina. “The importance of networking to entrepreneurship: Montreal’s artificial intelligence cluster and its born-global firm Element AI,” Journal of Small Business & Entrepreneurship 30 (1), 2018. https://doi.org/10.1080/08276331.2017.1402154.

First published in the June 2020 edition of The Business Advisor.

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