Financial Literacy Month in partnership with Scotiabank – Taking the Fear Out of Finance

*The following content should not be considered financial advice. Before acting upon the following information, we recommend you seek the guidance of a qualified financial or business advisor who can take your unique needs into account.

Financial management and funding are consistently the number one pain points for Canadian entrepreneurs. Powered by Scotiabank, in recognition of Financial Literacy Month, Startup Canada is shedding some light on this complex, multifaceted hurdle countless founders face across the country. Through the curation of specialised financial resources for small businesses and speaking to leading early-stage entrepreneurs across the country about their financial journeys, we can take the fear out of finance together!

In a 2018 study, it was found that less than 20% of Canadians believe they have strong financial literacy – with over 40% rating their financial literacy as poor. Financial literacy is something that impacts all Canadians, including entrepreneurs.    

This four-part series will take a deep dive into four key topics of financial management and planning for startups: 

1. Feasibility and Foundations.
2. Financing That Works for You. 
3. Performance Monitoring and Optimization for Profit. 
4. Retirement and Succession Planning. 

Retirement and Succession Planning

Retirement planning and strategizing around succession is often an emotional experience for founders – it’s exciting but scary all at the same time. Being our own bosses, founders often cannot benefit from traditional retirement plans like those used for the common workforce (unless, of course, your venture has incorporated these mechanisms).

While nobody builds businesses to sell them, planning for such contingencies is extremely important when building your business plan. This process can be intimidating for entrepreneurs, however, creating a “sellable” business must be a priority. A “sellable” business is divided into three core pillars – timing, business model, and self-sufficiency. However, there are other considerations you can make to give you a leg up on the competition.  

Here’s a high-level look at what you should consider in order to create a sellable business:  

ELEMENT	WHAT IS IT?
Timing	Whether you’re buying or selling a business, you need to identify trends and ensure timing is on your side. But how do you know when it’s the exact right time to buy or sell? When is your venture at its peak value? Many use a system called S.E.T. - a model developed by Nunzio Presta of Buy and Sell a Business that audits a business’ environment and market. S.E.T. stands for social, economic, and tech and analyses trends in each of these categories to help you determine the right time to sell your business. It’s important to remember that selling a business and finding the right buyer takes time - often 3 to 18 months.
Business Model	Whether you’re building a sellable business or looking to buy a venture, both parties will be looking for a few commonalities: 1) The business is profitable, growing, and has recurring revenue year-over-year. The revenue should also be diversified to mitigate risk (such as through different products, services, product lines, etc.). 2) The business has up-to-date, organised, and prepared financials. Most buyers want to see 3-5 years of financials in order to apply some sort of normalised projection.
Self-Sufficiency	Known as the Switzerland Structure for its emphasis on independence, a business should not be reliant on one leader, one employee, one supplier, or one customer. If your business relies heavily on external actors, that increases the risk and unknown performance factors on your business. Buyers will be hesitant to enter a business with so many unknowns, and fear losing clients or a big supplier that can jeopardise operations. As a leader, if you’re not replaceable, you’re a liability. In ideal circumstances, buyers should be able to walk in and operate their new business with no issues, or very few.
Other Considerations	Flexibility - If it doesn’t bend, it’ll break. As fixed processes tend to ensure both consistency and quality, many ventures are inflexible and rigid as a result - leading to a common inability to pivot quickly or iterate effectively. This can be a business’ downfall if some flexibility is not built into operations. For example, key processes that rely too heavily on the owner or reliance on one customer/type of customer can lead to brittle, unsustainable revenue and operations. Foundation - There is no shortcut for a well-run business. In good times, ventures can often slide by with sloppy practices, but these problems are often exacerbated when bad times inevitably come about. Thorough research, well built business plans, and consultations with the proper mentors and advisors in the early days can make all the difference. Bookkeeping - Does your venture understand its cash flow, have a good grasp on its assets, and have a plan for debt management? A solid financial plan and good books can be the difference between your business having access to financial programming and eager buyers or, on the other hand, losing a sale. Leadership - While the inability to replace a leader or owner is a liability when selling a venture, a venture’s team can also be an invaluable asset. A strong team can assist in retaining client contracts and confidence. Solid hiring practices, good company culture, and motivated/skilled employees are a competitive advantage and significant draw for interested buyers. Values - Dig deep and understand your venture’s unique value points. For example, do you have some form of intellectual property? Do you have a monopoly? Is your product or service a rarity that, time and time again, provides maximum return on investment to clients? Is your marketing footprint significant and engaged? All of these things will help in bolstering the purchase price of your venture when you’re ready to sell.

For this segment, Startup Canada was pleased to sit down with Cindy Purtill, Owner and Operator of the Georgestown Inn, to learn more about her financial journey – how her plan for retirement started before buying her venture, her in-depth transition plan, and her advice for early-stage founders when it comes to planning for their eventual exit.

SC: Tell us about you and your business! Who are you, and what does your business do?

CP: My name is Cindy Whalen Purtill – I’m the Owner and Operator of the Georgestown Inn, a six bed, six bath bed and breakfast here in beautiful St. John’s, Newfoundland and Labrador.

SC: Speak about your experience with finances and funding your business – was it something that scared you? What were your biggest worries or anxieties associated with money?

CP: We’ve been fortunate enough to secure financial support for our Inn, but at my age, I was quite worried about whether I would be able to qualify. Do lenders fund early-stage entrepreneurs at my age? Will my envisioned projected income be able to support an investor? Those were all the questions that I had when we were starting to put all of our pieces in place.

SC: Retirement is a stressful topic for many entrepreneurs. For you, what does your retirement plan look like? What steps did you take to get this plan into place and started?

CP: Well, actually, our retirement plan was formulated even before the plan for the Inn came into play. Our plan is to summer in a home here in Newfoundland and then winter in our Florida home, with frequent travel across Canada to visit our children and our friends. On the way to that goal, we wanted to ease into retirement by continuing to work for ourselves but from home, hence the Inn. I thought about this quite early on. My husband, John, also a lifelong entrepreneur, is 12 years older than me, so naturally, he would retire before me. We always knew our ease into retirement would be owning a bed and breakfast because that was my lifelong dream. About five or six years in advance of John’s exit from his previous business, we started looking for a property and preparing for our next stage.

It made that transition for him into retirement that much easier because we had a plan in place. We knew where we were going, and we knew the what, where, how, and why.

If retirement planning is causing you stress and worry, view the following from Scotiabank: Featured Resource: Saving for Retirement as a Business Owner.  Create a plan for the retirement you deserve.

SC: Why should founders think about this concept early on in their careers? Can it really make a difference? 

CP: Absolutely. It was something that we had to make sure we were putting in place due to our age difference – it was definitely a large factor for us. But I think regardless of the age difference, knowing the path that you want to take in your later years is elemental in being able to put those plans in place ahead of time, especially financially. You need to know where you’re going and what you need to get there.   

SC: Your situation is unique in that you and your husband took on this venture when you were 52 years old – did you go into this with an exit plan already sorted, or is this something that you’re currently planning for?

CP: Oh no, it was an integral part of our plan as we needed to envision what our final exit would look like. We gave ourselves a 10-year timeline to establish and entrench the Inn in the Newfoundland and Labrador tourism landscape. This was a new city, a new province, and a new industry for us, so we needed to make sure we had done our homework. By entrenching ourselves in that tourism landscape, we would also entrench ourselves online and in the community. So for us, it was really important to make sure that we had done our due diligence.

Our final transition plan is to sell a very highly successful business. We won’t be passing it down to our kids because our kids don’t live in Newfoundland – they are all across Canada, and they either have their own businesses and are young entrepreneurs or they already have established careers. We knew coming into this that the sale was going to be the exit plan for the business. Even down to fine details and logistics, like what furniture we’re going to keep and take with us in the future, is already sorted and put in place. We had all of these things lined up and done before we came here. We felt that knowing each detail of what our succession plan would include at the end was something we needed to know before we were able to begin.       

Curious about succession planning and exit strategies? Scotiabank can help:  Featured Resource: Why you Need a Business Succession Plan.  Start planning today for a successful transition. Featured Resource: Using Advisors to Plan your Exit Strategy.  Advisors are a valuable asset when planning to leave your business. Featured Resource: Sell your Business to Family or Strangers?  To make that process easier and more lucrative, you need a proper plan in place.

 SC: Many ownership transition plans include: determining the value of your business,  training plans for new ownership, and a communications plan for your team/clients/suppliers to maintain their confidence throughout the process, amongst others. What steps have you taken or will you take to ensure a smooth ownership transition?

CP: Well, we’re an incorporated business model, so we’ve put in place the right people, at the right time, for the right jobs. We have a great bookkeeper and keep excellent books, we make sure – obviously – that our taxes are filed on time, and we do a biannual review of the business structure and financial plan to make sure that we know how we are doing and can tweak things as needed as we go. This system ensures the finances are very clear and lets you know where you need to focus and hone your business acumen, as it were.

So far we have been really great and had excellent people in place to help us, from our lender right through to our guests. The guests are very important because, quite honestly, they are the number one source of feedback and reviews that let us know how well we are doing. Within Newfoundland and Labrador, tourism stats are collected monthly by our local ministry. So we’re able to stay abreast of our market trends, our guest wants and needs, and to keep up to date on our “bucket list” experiences for our guests so that on a daily basis we’re able to be the best innkeepers that we can be. Providing our guests with the best experience is so important to us – it’s a great place to come to, Newfoundland and Labrador. 

Also, just to get down into the weeds a little bit, I have personally curated a collection of traditional Newfoundland recipes. We are pretty full-service here at the house, serving a full main course breakfast which includes a lot of traditional Newfoundland tastes and tipples. We have established proven policies and procedures with regard to the day-to-day operations of the Inn and have secured a really dedicated and trained team. I really feel the Inn would offer a welcoming, seamless and turn-key experience for any new or established entrepreneur to step into. Of course, John and I would be close by to assist and advise as needed. As we say here in Newfoundland, when the tide rises we all float.     

Wondering about transition planning? View the following from Scotiabank:  Featured Tool: Ownership Transition Tool.  Consider the key elements of ownership transition to ensure a smooth change to the next stage of your life. Featured Resource: Buyer’s Market: Who Will Buy Your Business? Getting a jump on plans to sell your business may mean the difference between reaching a comfortable retirement and having to come up with an alternative plan.

 SC: Do you think your industry and location will influence your succession plan and exit  strategy? What advantages and/or challenges do you anticipate?

CP: Oh, absolutely. We actually chose this industry based on the location and the growth in the hospitality industry that is happening here. Tourism is one of the largest industries in Canada. In Newfoundland, in particular, it accounts for 10% of all full-year jobs. So we didn’t happen upon Newfoundland and Labrador by accident. Within Newfoundland, we have a really robust and active hospitality sector where we believe, from a gas station attendant to an accommodator, we are all in tourism. Advantages range from support from industry leaders here, such as Newfoundland and Labrador Tourism – you’ve obviously seen the beautiful ads they make – to an excellent local ministry that really supports the industry quite a bit, our local Chamber of Commerce, our advocacy network called Hospitality Newfoundland and Labrador, to our neighbours and online presence. 

A challenge may be that we’re an island in the middle of the Atlantic. There are only two ways onto the island, by ferry or by plane. So finding the right entrepreneur to purchase the Inn is going to be someone who’s specifically looking within this industry. However, the climate, we feel, for a bed and breakfast is kind of everyone’s dream. A lot of our guests come through the door and say, “this is my dream, my dream has always been to own a bed and breakfast”. I was fortunate that this was a dream of mine that I was able to make a reality. I think it was the right thing for us – tourism is really growing in Canada, it’s a growth industry for sure. We really feel as though we made the right choice.  

SC: What advice do you have for early-stage founders in terms of retirement planning and exit strategies? Where should they start?

CP: In their initial planning stage, they need to envision what their optimal thriving business is going to look like. From that viewpoint, they need to strategically plan their exit that will allow them to step out in order for a new owner to enter as seamlessly as possible. New entrepreneurs should strive for that. It’s really important to know where you’ve been in order to know where you’re going. If new founders can implement that from the beginning, I think it will carry them through their business. Even though it’s all fresh and new, you’ve got to envision what that success is going to look like for you and place yourself in the middle of it all. By doing that work early, you’ll know when it’s time to sell and move on, but it will also guide you through your everyday day-to-day decisions in the meantime.

Want to explore getting the right price for your business? View Scotiabank’s:  Featured Resource: Boost Your Business Value Quickly.  Ideas on how you can create value over time. Featured Resources: Getting the Best Price for Your Business.  Your business is worth what the highest bidder thinks it’s worth, unless you can convince them otherwise. Featured Resources: Negotiating with a Business Buyer.  Negotiating a deal to sell your business is exciting. Naturally, it can also be stressful.

SC: If you could talk to your younger self about the anxieties surrounding money and financial management you discussed above, what would you tell her?

CP: Well, I’m a worrier. When I was younger I was always worried about stepping into new ventures and doing new things. Now, I think healthy anxiety is good – it makes you second guess your decisions but it also helps you build trust in yourself. What I have learned now that I didn’t know then was that sometimes today’s worries are tomorrow’s successes. 

SC: Why is financial literacy crucial for founders to get a good grasp on early? How does it give you a competitive advantage? 

CP: I think it’s crucial for founders to get a good grasp on financial literacy early on to ensure a strong foundation. Knowing both your tangible and intangible value will ensure that the building blocks of success will fall into place more easily. I believe knowledge of self and confidence in your finances allows you to focus more on the core of your offerings, your client base, your daily cash availability, and your future expansion options. If you build out a financial roadmap in the beginning, you’ll give yourself easy-to-follow directions for the future. 

SC: What’s the most actionable piece of advice entrepreneurs can take from this conversation and implement in their businesses immediately?

CP: Well, my kids always say it was never their dad who made the dad jokes, it was always their mom. So here’s a little piece of advice: always make your financial bed first. That way, no matter what, you’ve already had a successful start.

SC: Thank you so much for your time today, Cindy!

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