The workforce shortage is the issue of the day and every analysis suggests that there is no end in sight. Our experts discuss solutions.

On average, there are only 2.3 unemployed workers for every job opening in Quebec. Additionally, labour needs and the pool of available workers are not always in sync. As a result, many positions remain vacant. Here is an overview of solutions to the shortage.

Define your employer brand

Is the employer brand an expense or an investment? In the current workforce context, it is decidedly an investment and one that yields benefits.

Your employer brand is your personal signature on the job market. It influences job seekers’ perception in their search and instills confidence, a strong incentive for candidates. The employer brand is your image.

The employee experience is tied to your culture, values, philosophy and management practices. Your brand reflects your employees’ actual experience and helps attract people who share your values. It boosts employee engagement, performance and loyalty, reducing the turnover rate.

A strong employer brand combined with a meaningful employee experience result, on average, in a 28% lower turnover rate and a significant reduction in employee replacement costs. The key principles that help define, position and solidify your employer brand are knowing who you are, promoting your DNA, giving meaning to what you do, optimizing your recruiting practices and improving your human resource management practices.

International recruiting

There has been an increase in the majority of vacant positions in Quebec between 2020 and 2021. Immigration is seen as the preferred solution to the shortage according to Emploi Québec. Depending on the industry, the Temporary Foreign Worker Program or International Mobility Program may best suit your needs.

However, international recruiting comprises numerous steps and your company, and even your community, must be prepared to welcome immigrants in a positive environment. If you have their trust, they will stay with you and may refer you to others interested in working in Quebec.

Do you want to find out more about the steps and success factors of international recruiting? The AURAY Sourcing International experts can guide you through the process, from planning to integration.

Digital retail industry

Did you know that only one quarter of Quebec businesses have a high level of digital maturity? And, companies that have this attribute have stronger sales and profit growth. They export and innovate more, while being more productive. Digital transformation allows you to streamline some tasks and let your staff focus on value-added tasks.

In addition, digital transformation provides for better use of data for decision-making based on real-time information. By connecting retailers, suppliers and customers, it can help you increase the value of purchases on transactional sites.

In brick-and-mortar stores, it’s possible to manage inventory in real time by using product sensors. These are considerable advantages for companies. Investissement Québec offers a subsidy to support businesses in developing their digital transformation plan.

Foreign workers and tax compliance

Employers who decide to use foreign workers should be well informed about the tax subtleties of their special status. What are the criteria that define one status or another? What are the obligations regarding withholding taxes? What information must be reported to tax authorities? It’s important to consider these questions.

Contact our experts for the appropriate guidance on dealing with the various options to address your business’s challenges.

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Alain Tremblay
Partner | CPA, CA, CA•TI | Assurance

You wish to acquire an SME as part of a business transfer. Key step to take: convince a banker to help you finance the transaction.

You’re on the verge of buying an SME as part of a business transfer and negotiations are coming along well. Before your dream can come true, you’ve probably got one more step: convince the bank to help finance the transaction.

Remember that, first and foremost, when financing a project, the lender’s priority is to minimize its risk, particularly considering that an ownership transfer is a fairly risky event in a business’s life.

That being said, as a transferee (we’re using the singular here, even though you may be several partners), you have an advantage over someone who’s just starting a business. The company you want to buy already has a history, its revenues and profitability, clients, etc. are known quantities. You have tangible information to support your application.

Different criteria

The company’s background is a key element in analyzing a business financing project because different criteria apply depending on how old the company is. SMEs that are less than five years old are generally considered to be more sensitive, as they are riskier.

Lenders also consider the size of the transaction, which will impact their requirements. In the case of smaller transactions (under $500,000), for example, the lender will look at a few key indicators, such as the transferee’s credit and net worth and could require personal guarantees. In this type of transaction, the lender could also analyze the transferee’s ability to inject funds to support the business and cover any contingencies.

A solid team is key

If the lender is satisfied with the financial aspects of the application, he will then undertake a qualitative evaluation. This is when he will take a close look at the quality of the transferee’s management team, including:

-The transferee’s entrepreneurial experience and knowledge of the targeted company. If the transferee is already in the company (family member or employee), the risk is lower, since the transferee already knows the business and its industry;

  • Whether key employees are identified and if they will remain;
  • The transferor’s commitment to stay on to ensure a smooth transition;
  • The presence of an advisory committee, ideally with the transferor on board;
  • Whether the transferee is supported by a professional accountant and is receiving outside help (specialists, mentor, etc.), particularly if he has any managerial weaknesses.
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Make a good impression

The fewer unknowns in the project, the greater the financial institution’s confidence will be. Be prepared and properly supported. You need to carefully plan the business’s transfer and development.

The financial forecasts must be well developed and based on solid assumptions.

Beyond the numbers though, it’s critical that you make a good impression with the lender. You have to prove that you’ve asked yourself the right questions and found solutions to offset any weaknesses. For example, talk about the support you have (transferor’s involvement, advisory committee, support from a professional accountant, etc.), especially if you’re an external transferee and don’t know as much about how the business operates or its industry.

Our team can help you with complex steps, such as evaluating the business, performing the pre-purchase investigation and determining the strategic issues and business plan.

Hint: To accelerate the processing of your financing application, get the lender involved early on, that way the process won’t be delayed if he has additional questions.

The balance of sale

Another key component of the business transfer financing process is the balance of sale. This is the total transaction amount that will have to be subsequently repaid to the transferor, in accordance with the terms set at the time of the sale.

This is often a major issue during the transfer negotiations. The transferor wants to minimize the balance to reduce risks, the transferee wants a higher balance to keep short-term financing requirements as low as possible.

Most of the time, the lender’s preference is that the transaction include a balance of sale in order to limit its fund injection and share the risk evenly between the three parties: lender, transferor and transferee. The balance of sale takes on greater importance with a less-experienced transferee with limited financing. Furthermore, if there is a balance of sale, it’s in the transferor’s interest to stay on board and support the business’s operations, which also reduces the lender’s risk.

The balance of sale is calculated using the debt ratio, and in a business transfer should not be greater than 3:1, i.e., debt should not be more than shareholders’ equity times 3.

In some cases, the balance of sale could be considered as shareholders’ equity if paying the bank loan has priority. Consider a $400,000 transaction with a $250,000 loan, a $50,000 injection from the transferee and a $100,000 balance of sale. The balance can’t be paid until the loan has been repaid, which reduces the lender’s risk. The balance of sale improves the overall financing application and makes it easier for transferees with limited resources to become shareholders.

If you’re planning to transfer your business, our experts can help. Contact them today!

30 Sep 2021  |  Written by :

Alain Tremblay is an assurance expert at Raymond Chabot Grant Thornton. Contact him today!

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Eric Dufour
Vice-President, Partner | FCPA, FCA | Business Transformation

The workforce shortage is a major issue that requires SMEs to be quite agile. In this respect, an effective and timely succession plan is a very useful tool to retain the best talent within the organization.

Some of your best-performing employees could therefore be involved in the eventual transaction, becoming future shareholders. To this end, communication between the transferor and potential buyers must be clearly established. The current business owners must indicate their intentions. If they want to leave the organization in five years, they need to be up front about it. Nowadays, business succession is no longer just a family matter.

Therefore, have the courage to discuss the issue directly with those you think could eventually take over internally. Three steps make it easier to complete this transition project.

A– Identify key employees

Have the employees you’re considering established a career plan? Do they have the requisite entrepreneurial skills? What are their professional goals? These discussions set the stage for the next steps. For example, you could give targeted employees a few management assignments in advance to gauge their interest and see if they have the right job profile.

These additional responsibilities assigned over time can also facilitate the transfer of authority. The financial capacity of the buyers to obtain the required financing should also be considered. They can then benefit from a gradual integration into the shareholding structure. At the same time, the buyers will increase their participation in the organization.

B– Get help

Entrepreneurs obviously can’t do everything alone. People who transfer ownership of a company they’ve been running for 25 years sometimes think they can navigate the transfer maze on their own. Beware of this wishful thinking. The support of a specialist can make all the difference in the development of a succession plan. Using an external resource ensures that you have a fresh perspective on the situation. And what could be better than to be able to count on leading-edge expertise to leave nothing to chance?

Lastly, remember that a business transfer is not something you can improvise. By relying on a specialized team, you can anticipate potential problems and gradually transfer the required knowledge. Transferors should not disappear overnight following the conclusion of the transaction.

C– Ensure a smooth transition

Over time, potential buyers will put their own stamp on the business. The transferor and buyer should expect an overlap during the transition process. It is not uncommon to see the buyer get involved during the first year following the transfer and even to hold the position of board chair. This type of transfer doesn’t just take place at the time of the visit to the notary’s office: rather, it is spread over a period of time.

You have to trust the leaders you choose to carry out the process. They may have different methods, but you have to accept these differences. For their part, buyers must understand that it is a part of yourself that you’re leaving in their hands.

Get employees involved and ensure their loyalty

If you plan to withdraw from the business, state your intention early enough to allow for the development of a proper succession plan.

By letting it be known that there are opportunities for advancement as a result of your eventual departure, you give key employees a chance to demonstrate their interest and skills and, perhaps, invest their energy in ensuring the sustainability of “their” SME. That way, you can be sure that you can count on your best collaborators in the coming years.

30 Sep 2021  |  Written by :

Éric Dufour is a vice-president at Raymond Chabot Grant Thornton. He is your expert in management...

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Clara Demers
Manager | Human Resources Consulting Practice Leader | Business Transformation

When it comes to business transfers, setting up a family council can be a winning strategy for ensuring the sustainability of a business.

Over the next few years, many Quebec businesses will be transferred to buyers from within the family circle.

In some cases, it’s also possible that external buyers will also be involved, but the fact remains the same: multigenerational management is an issue that family businesses must face.

Starting an entrepreneurial succession process is a long and complex project. In the context of a family succession, the stakes, emotions and feelings are put to the test. It’s like airing problems and issues that are usually private.

Preserving the harmony thanks to a family council

The family council is a key structure when the family grows and the family-business relationship becomes more complex. It provides an opportunity for family members to express themselves. However, setting up a family council is not automatic.

It’s important to understand the family history, ties and relationships between family members. When we undertake a business succession assignment, it’s essential to have a human approach and a proper grasp of all aspects involved.

This is even more true in a family succession context. It’s almost like interfering in people’s private and professional lives; some discussions will be easy, but others will be more difficult and painful. The complexity of the case will determine whether or not to involve a family council. In complex family succession cases, a family council can be very useful for all parties involved.

What is seen in most cases is that when the future management team, which includes external members and others from within the family circle, meets, some things may be left unsaid. And if they are not addressed, these unspoken things can be detrimental to the proper functioning of the management team. That’s where the family council may have a role to play.

When setting up the family council, it’s important to define a broad framework and structure that includes all family members. It’s also essential to identify a common goal. Achieving this goal requires active listening and honest participation by all.

The family council’s mission is to preserve family harmony while ensuring the business’s stability. To achieve this, everything depends on good communication between the participants.

The family council as a place of exchange

Our approach to the practice is very human; our desire is to satisfy everyone, and in order to achieve this, we must let everyone express themselves and hear them. We set up a family council in which we play the role of mediator. This council meets about twice a year and offers all family members the opportunity to share their opinions and resolve certain situations.

The family council is an ideal place to communicate, exchange and set policies and procedures concerning family members, such as hiring them in the organization.

Family council sessions are not family meetings; their purpose is to resolve situations and address concerns. In a family succession context, there is tension and disagreement. Our role is to guide these meetings, but to do so, all family members must be present.

Family councils are opportunities for everyone to express themselves and be heard. It’s not about interfering in family life, but rather it’s a window where everyone can speak and be heard.

What do the external buyers think?

This approach is very well received by external parties taking over, who encourage and respect this practice. It’s also in their interest to put all the chances on their side to ensure the sustainability of the business. Moreover, the family council is not a decision-making forum, so this does not bother external buyers who are in favour of such an action. Instead, it helps preserve harmony.

Preparing the next generation

The family council also helps to raise awareness and prepare the future generation that will take over the business. By valuing members, they act on the family’s behalf to preserve its heritage, which will have a positive impact on the company’s sustainability.

For more information, contact our team.

30 Sep 2021  |  Written by :

Clara Demers is your expert in Business Transformation at Raymond Chabot Grant Thornton. Contact her...

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