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The first time Gabriel Charky sold his business, the transaction was fraught with emotion. He had started Madvac Inc., which makes industrial sweepers in his basement and nurtured it as he would a child, watching it grow into a $10 million a year venture.
"There were a lot of sleepless nights," he says. "I tossed and turned wondering whether I should sell or not."
That was in 2000. He did sell, however and as part of the deal stayed on with the company, first running the business he created and later taking over all North American operations for the expanded organization, created by the sale of Madvac.
Last year things came full circle and with the help of 10 partners, Mr. Charky bought the business back. This time succession issues have become simply another business decision. His agreement with his partners provides a variety of alternatives should he want to dispose of his 24% holding. The longer he stays as president of Allianz Madvac Inc. of Boucherville, Que., and the greater its growth and profitability, the more he will receive for his shares.
"I learned a great deal from the experience," he says. "I grew enormously as a manager. Last time it was all about emotion. Now it is about maintaining growth and realizing the best price for a substantial asset."
"Business transition planning can be a tremendously emotional experience," says Michel Bergeron, BDC's Vice President of Corporate Relations. "These are companies the founders have created, nurtured and poured their lives into. The greatest challenge they often face is taking that step back and separating their personal interests from those of the business."
The emotional aspect will often be more difficult in the context of family transition, where it is harder to set aside personal feelings and maintain an objective mind when reviewing business decisions.
Yet making those good business decisions are paramount to the continuing health and growth of the companies in question, says Debby Stern, a partner in Soberman LLP, a Toronto accounting firm.
"There are just too many situations where the death of the owner triggers potential disaster," she says. "The family finds there is nothing in place to ensure the continuing operations of the business. Nobody is prepared and often the business drops dramatically in value."
The lack of transition planning in businesses may present one of the country's greatest challenges. A June 2005 survey by the Canadian Federation of Independent Business showed that 65% of small and medium enterprises have no succession plans and only 7% overall have anything formal.
"Small business makes up 90% of our client base and yet we may only deal with 20 succession plans a year," says Daryl Heinsohn, of Laberge Venne and Partners Professional Corp., a Sudbury accounting firm. "They all need one but few take the time to start the process."
To help clients meet the challenges, BDC has created a new program called Transition, says Mr. Bergeron. It comes in two parts. The first is a consulting service to help assess exit options and prepare a transition plan to enhance long-term viability and maximize value creation. The second deals with financing in various contexts such as transfer of ownership to family members, management or third parties.
"The first step involves personal decisions by the owner," says Mr. Bergeron. "Entrepreneurs have to work out what sort of lifestyle they want over the longer term, how much money they will need to fund their retirement and what, if any ongoing involvement they want with the business. They should also decide on what sort of time frame they are looking and what kind of business legacy they want to leave behind."
"Once those questions are answered then we help look at the various options that will deliver what they want."
Mr. Charky says that having gone through an unplanned sale of his company taught him valuable lessons and, in the end made him a better manager and a better entrepreneur.
"What I now see is the great need to take a dispassionate view," he says. "I have had to become a better manager and focus on growing the company. The succession issues are just a small part of the overall plan for the future.
"In 2000 I had maybe 60 to 70 people and was doing $10 million a year. Today we are doing $80 million and have 200 employees with operations in Quebec, New York City, southern California and China.
"Because the future is well planned I have a range of options. The longer I stay, the greater the growth the greater the value of my shares. I can even choose to step up to chairman and hire a president. And it is all the result of proper planning"
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