Success while sick

Success while sick

Q: I’ve been diagnosed with cancer and need to take a month off work for treatments. How can I keep my business running smoothly while I’m not there?

A:

If you’re only thinking about this now, it’s like buying storm insurance as the hurricane hits. What we often see is that entrepreneurs don’t want to delegate any authority or groom management for situations where someone else needs to take over. However, a scenario like this is one of the reasons why you need to build a competent management team.

Giving certain employees added responsibility isn’t enough. You have to give people the authority and autonomy that enables them to make decisions and manage all your business relationships, including customers, suppliers, workforce, regulators, creditors and banks. They’ll need to earn your trust.

But even as you build people up, consider certain legalities. Who’s going to sign cheques or contracts in your absence? What about dealing with Canada Revenue Agency audits or other regulators? Also, consider what previously confidential information about the business you want employees to know. These are difficult decisions to make on the doorstep of the cancer clinic.

Here’s something else to consider: What will people outside the company think if you suddenly leave? The external communication about your absence will need to be managed. While you don’t want to mislead anyone, too much clarity or disclosure isn’t necessarily wise. Your goal is to minimize unnecessary panic or lost confidence in your business so your people can carry on “business as usual” while you’re gone.

Business interruption and “key person” insurance (the latter is essentially life insurance on the key person in the company) also go hand in hand with planning and being prepared. If you have bank loan payments and payroll to meet, this may buy you some much-needed additional time. Get advice about how much to buy and what to cover.

If you haven’t dealt with this already, then organizing your businesses in the midst of battling cancer will be a challenge. In other words, entrepreneurs should start planning for something like this now.

— Dan Bilenki, Senior Manager, Tax, KPMG Enterprise Group, Calgary

— Rhys Renouf, Partner, KPMG Corporate Finance Group, Calgary

Q: I’ve been talking to some venture capital (VC) firms about investing in my business, but some want close to a 50 per cent stake in the company. Should I give up that much control for the money? What are the pros and cons of selling half the company for VC dollars?

A: It’s key that 50 per cent or more of your company stays Canadian so you don’t potentially lose benefits, like a lower Canadian tax rate or higher Scientific Research and Experimental Development (SR&ED) tax credit entitlements.

While the right VC partner can provide that needed injection of cash, operating your business could be very different going forward. You typically give up some of the strategic direction of your company. You may be restricted from or forced into doing certain things in opposition to your vision. You’ll also have to provide additional reporting and oversight to a VC. You may also have a shareholder who expects to be involved in management decisions.

So don’t just jump into bed with the first venture capital company that comes along. Find a fit and a common business partner who has a similar vision. Even if the strategic vision differs, make sure it’s along lines you can work with.

When doing your due diligence, look at the VC’s history of ownership, its strategic exit strategy and if it’s hands-on or -off with other companies it’s invested in. The investor will look for a rate of return, as should you. Make sure it’s commensurate with what you would have realized otherwise.

Go in with the mindset that you want to retain control. I may be willing to give up 40 per cent and possibly more, but if you can keep control you can opt in or out of their advice.

— Paul Woolford , Partner, Tax, KPMG Enterprise, Toronto