CAPITALISM is DEAD

Past Week Highlights

• Employee Ownership Trust (EOT) - An EOT could provide a business owner with an improved method of selling their business to employees, with less risk. However, it seems there is more to do before Canada benefits from an EOT similar to what the UK implemented in 2014 (Some numbers say that ~350 owners have transitioned their businesses to >30,000 employees since the inception of their EOT program). The Canadian government drafted EOT legislation this past summer and we can expect a revision likely in Q1-2024. Here is a simple breakdown and highlights of the financial benefits of the UK EOT.

  An important correction to the Oct 29th article is that there are more than two options business owners have for selling their business. There are independent Searchers (🖐️ I am one) working with micro PE investors who are aligned with a long-term investing horizon and carrying the business legacy forward. We are not running the model of buy-grow-flip, but rather buy-grow-transition and hold long term.

• SMBs are being targeted! - Yes, two issues in a row, but the topic is important and you need to hear it several times 😁

  Cyber security is on the minds of SMBs and if you are an owner it better be on yours. Hackers are targeting SMBs as an inroad to the larger corporations they work with. Confidential competitive data, customer data, banking data, brand degradation, and the list goes on. There are actions you can take today and do not need a security expert to help (but that may be a good idea): 2FA - two-factor authentication, using a password app that increases the complexity of passwords, and keeping your software patches and updates, up to date 👮🏽‍♀️

Social Impact + Profit (Transforming SMB)

• Is Capitalism Dead? - No, it is not dead nor dying. Our world needs capitalism and the great innovations it has spurred over the past centuries. It is, however, in need of an evolution to enable all of our future generations to prosper. Saying a company must choose profit OR impact and cannot have them both is false. There are many companies operating today that realize great profits and are delivering a positive impact in the communities they operate in. For example Turner Capital Partners. Digging into the 2019 archives: An interview with Bobby Turner. 

  • Coming back to 2023, here are the details on how TCP measures the value of social impact in step with generating financial returns for their fund. #profit+impact  

    A few years old, however timeless content.

• Building a Socially Impactful Consultancy (Podcast)

  • Integrating sustainability and social impact into a consulting business model is essential for long-term success and client satisfaction. (12:30) Implementing policies and practices that prioritize work-life balance, paid time off, and support for employees can lead to better work quality and employee well-being.

• Hippy Feet - Profit & Impact (Podcast)

  • A sock company changed their business model from a buy-one-give-one to an allocation of business profits that realized a larger impact. You need to ask “Are we solving a symptom or the root cause?”

Provoking thought:

• Profit & Impact - It can be achieved but you need to be looking for it. Different thinking will be required

• Philanthropy and sustainability practices can be great components of a Regenerative business where the objective is greater. Regenerative businesses generate profit while improving social and environmental well-being. The key word is improving (upgrade, refine, boost)

Learnings

• Investment Search Thesis (ETA) - What is a search thesis and what needs to be included? This gets asked quite regularly and is simple but does require deep thought and regular assessment as you journey to find an SMB to acquire. This video conversation provides a good high-level framework.

• Canadian M&A Q3 Update - RBC Mid Market - I received this update from a mailing list this week. Highlights:

  • M&A continues to track at the lowest level in the past 5 years - down 25% since 2019

  • EBITDA multiples are down ~14% on TTM

  • International buyers remain active with ~50% of deals

  • 10 Notable deals within NB, ON, QC, SK, AB, BC

    Unfortunately, there is no public link to the report and we don’t want to get in a tight spot by reproducing the content. Jason de Weerd has offered to pass along the report to Unconventional SMB subscribers (no cost & no strings). Send him a note referencing this newsletter.

Networks

~Following last week’s issue, remember to think about who you are following and how they align with your two focus areas of improvement~

• Kevin “KD” Dorsey - I’ve known KD for a few years and have connected with him in person at Pavilion events. I have also taken one of his sales courses on Udemy a few years back, which helped form the playbook I use with my sales teams today.

  This guy grinds - eating, sleeping, breathing, and challenging everything sales. Sales are a critical part of any business regardless of the size. KD regularly posts actionable content and brings a “get-real” voice that’s focused on the customer and delivering value.

• Eric Partaker - I’ve been following and interacting with Erik on LinkedIn for several months. His content is tailored for CEOs and leaders who want to continuously improve their skills. I have a Notation doc where I regularly add ideas, content and courses that align with my focus areas of improvement. Erik’s suggestions account for about 25% of my list today.

Making Introductions

I owe everyone an update on my ETA journey. It is coming, I’ve just been busy executing and meeting with exceptional people 😄.

Over the past six weeks, I have been connecting with searchers, new operators, business owners, prospective investors, and search funds. These conversations will tally up in the high hundreds over the next 12+ months.

The majority of people I reach out to are more than happy to have a call and share their stories, insights, and what they are focused on achieving (chatting with existing business owners is exceptionally energizing for me).

I’ve been thinking about how I can provide value to these great people throughout my journey. I have also been asking people, at the end of our conversations, how I can help them. Typically, the answer involves introductions to people who align with their top objectives. Therefore, I will be continuing to make introductions between searchers, operators, owners, and investors regularly.

Every week I capture the top three focus areas from each person I meet with. Reviewing this information I identify who has the potential for mutual benefit and proceed with making the introduction.