Who’s next? Cowichan Valley boomers selling off their businesses

Maintaining a viable Valley economy could be challenging as baby boomers retire and sell their businesses.

Maintaining a viable Valley economy could be challenging as baby boomers retire and sell their businesses.

Or attempt to sell their businesses, according to Cathy Robertson, executive director of Community Futures Cowichan.

Over the past few years she’s seen some owners face the future with a combination of fear and frustration.

There are many issues as the Valley, and indeed the world, moves on to a new economic generation and what is called “succession planning” is becoming a real problem.

Most local entrepreneurs have planned on using the money from selling their businesses to finance their retirement. But sometimes no one wants to buy that business, or the family members who’d been expected to step up are balking, or the owner secretly doesn’t want to sell and keeps killing off prospective deals.

And then there’s the internet. People are now either doing business online, moving to the internet or wondering if the internet is going to affect their businesses.

Anyone who wants their succession planning to be a success needs to do a reality check as they prepare to sell.


As in selling a home, owners need to look with the eye of a buyer, according to Robertson.

“You’ve been coming to work every day. You love your business. You are emotionally attached to it; it’s the third child in the family. But if you looked at it as a real estate agent or potential buyer, you might think: That awning’s a little bit ratty; that would have to be replaced. How many stickers have you put on the front door? There’s a lot of glue there. Not a single piece of furniture matches! Look at that shag carpet!’

“But you’ve got memories. You think: I worked hard putting in this carpet 30 years ago. And these cabinets are original wood. Your bias is now emotional. You think you’re selling a $200,000 product and all the buyer’s thinking is about how much they’ll have to pay out to upgrade. They’ll ask questions about when your computers were last upgraded, They don’t want to hear: five years ago. Or that you’re running Windows Vista. Sure, you may have figured out how to run your business really well on Vista but the prospective buyer is thinking, well, add $10,000 to my cost because I have to buy all new computers and software. Your location, the state of your heating system, your lease — those are all factors, too.

“All of a sudden, they’ll only offer you $35,000 when you thought it was worth $200,000.”

It can be a painful wake-up call to see what others see.

As far as your physical plant is concerned, Robertson says sellers need to be “the shiniest penny in town.”

Next up: your books.

“Then, prospective buyers will say, well, your sales haven’t been doing so well and your customer list has been slipping. You also need to be able to show them the trends in your business. Is it going up or down? Those influence the price, too.”

All that crosses swords with a belief, left over from the 1970s and 1980s, that you should take as much as you can from your small business.

“It’s carried forward to today: they don’t want to pay taxes so they try to tell you, the buyer, that there’s really another $60,000 or so in revenue from cash deals there but it’s not on the books.”

That’s where talks can hit the wall.

“The buyer will say, Really, you want me to go to my bank and borrow money based on some income that’s not even on the books. Prove to me you can pull that much out.’” she said.

These are two issues for selling: a price point reflecting wear and tear, and a good set of financial statements.

Both are important but money can be a deciding factor because nine times out of 10, someone is going to have to finance that purchase, Robertson said.

“And those lenders are going to go hard at those financial statements. They are going to pick them apart to determine the capability of the business to repay that loan.”

Finding lenders don’t want to advance enough money can be stunning to both buyers and sellers and there are a lot more sellers than buyers.

“That is the good old baby boomer ratio. You can’t argue with those numbers. There are just more of that generation out there. So, if you are a buyer, you can have your pick of businesses,” she said.

Buyers may be looking for a “lifestyle” business so a seller could be duking it out with a coffee shop, a laundromat, or maybe a printing shop for a prospective purchaser’s money.

“People are going to be attracted to you a little bit on lifestyle, but they are also looking at a financial return.

“And if you are bottom of the barrel, it’s going to be tough to get the attention of buyers. Also, the kids hopefully coming up are broke. Where are they going to get the money from?” Robertson asked.

“How creative does your financing have to get? There’s a lot of vendor take-back. It’s quite often the only way people can move their business.”

This all becomes everyone’s problem because it can affect communities as a whole.

“If we don’t find solutions, you’ll go down Craig Street, or Kenneth Street, and find there are a lot of empty storefronts. You’ll lose that critical mass,” Robertson said.

“How do you attract new tenants then? They’ll look around and say, but I’m going to have no neighbours. Why would people come to this corner of town at all, let alone into my business? That’s why it becomes a community issue.”

Robertson praised efforts made in Duncan.

“The last I heard they have 98 per cent occupancy on their storefronts. They’ve done an amazing job,” she said.

Succession planning could also involve selling the idea to the kids.

“Children of baby boomer business owners may have seen dad work his can off for 40 years and think, Dad never came to soccer, Dad paid himself last, Dad got called in on Saturdays. I ain’t working for myself.”

And any determined young entrepreneur may also have ideas of their own.

“They want start up-businesses, they want to do tech, they don’t want to buy old and tired,” Robertson said. “But to make a viable community you still need that blend. So who is going to come up and be the little corner grocers — all the places we frequent but don’t value until they’re gone.”

Part of the difficulty is that people like living in a place that has an attractive town centre but don’t always realize Main Street is a two way street.

Some folks have to own those businesses while others have to be their customers.

That can also affect local professionals, like pharmacists, and accountants. Rural B.C. is running out of lawyers, and doctors, too, because of the lure of larger centres.

Venture Connect, a company connected to Community Futures that Robertson is involved in, helps to look after the non-financial side of selling businesses. And help is needed.

“Selling is the most emotional thing you’ll ever do besides having kids. You wouldn’t believe how many business owners scuttle the deal because, at the end, people don’t want to retire.”

Succession planning involves planning for yourself, too.

“The reality is, what am I going to wake up and do? Where am I going to go? Will I have enough money?’ Fear sets in. But the biggest piece is identity.”

Those issues matter in a social world where the first question often is: what do you do?

“Venture Connect works a lot with people in transition now. It can be painful watching some people after they retire, as they become miserable and start to complain about everything because they have nothing to do with those extra eight or 10 hours a day. We hear this time and time again. It’s hard to sometimes close a deal and it’s totally understandable.”

Even within families there can be tension.

Sometimes the stubborn assumption is that the next generation will take over despite years of resistance from kids who are just not interested.

And, if they do buy out dad or mom, problems emerge over parents feeling left out.

“Say the younger generation now has big plans. The conversation can be, we’re going online, we’re shutting stores down.’

‘You can’t!’

‘Dad, we bought the business from you.’”

Then there’s the parent that keeps coming to work and micro-managing.

The majority of businesses in Canada are indeed owned by families and these squabbles can cause trouble if the two sides “have to cut turkey together in a couple of months,” Robertson said.

Another, quite popular solution is selling a business to staff.

“A couple of staff members will rise up and form a partnership, incorporate. That’s a pretty good scenario. What it does is give confidence to the client list. A connection is maintained,” she said.

A third option is to simply put it on the open market and hope someone will love your business as much as you.

“Or you might have to sell it for parts,” she said. “That is when you see how future-proof your business is. If you’re in a sunset business, it’s going to affect your price point.”

Another group of people who may be looking to buy businesses in the Cowichan Valley are early retirees relocating to the Island.

“Senior-preneur” and “lifestyle-preneur” are new buzzwords for these folks, Robertson said, adding that a high percentage of new businesses are started by seniors.

They have the wherewithal to buy, but these purchasers can be choosy.

There are also lots of people from other countries interested in buying businesses in B.C.: Americans, Russians, Britons, with Asians highly visible among them, she said.

The need to sell is driving this non-Canadian market. Frustrated sellers are getting antsy because their business isn’t selling.

“They start to think, I can’t let this go for less because my whole RSP is tied to this price. So who do they end up selling to? People with cash.”

No matter who you hope will be the buyer of your business, Robertson urged anyone who plans to sell in the next five years to “make it the best five years of your life.”

And as to what will happen in 10 years when a lot of these boomer business owners simply won’t be able to do it any more, she’s looking to entrepreneurship to triumph, one way or another.

“I think we can be confident that even as one business closes, another business opens. It wouldn’t be an exact replacement but there will be enough that are responsive to the community need to keep our critical mass.

“We may lose an age-old business but you might see it replaced by an organic juice bar and a place that fixes iPhones. You can’t draw a direct line about replacing a product or service. For example: spas. The many young women running these now they are doing exceptionally well. Look at pet food and pet supplies. It’s the fastest growing sector now because our pets are members of our families. That’s another example of how things are changing. And what about health and fitness? You have personal trainers now. These can be businesses that are on the second storey of your downtown, they don’t need a storefront. Or they may be a home based business.”

“As long as we are a community that is embracing of the entrepreneurial spirit and those entrepreneurs have the supports they need to make themselves successful, there’s a good future,” Robertson said.