6 strategies for an investment mindset

Last week, I wrote about how a leading Canadian entrepreneur in the restaurant business survived through the many past economic crashes. One of the reasons is because this business owner was very good with money. He understood that his restaurant chain business was one part of a diversified portfolio. Of course, he invested back into his business, but he took money out every month for his portfolio. This peace of mind with the family's future certainly helps when grit is needed to keep the business afloat.

I read this article by Jeff Noble, BDO, with interest as he continues the theme about how a business owner can create that investment mindset. Jeff and I are colleagues involved in The Business Transition Forum and he specializes in helping business owners transition their organization through their business lifecycle. During this time of COVID-19, Jeff writes about business owners and the 6 strategies to adopt an investment mindset.

Read the full article here.

Entrepreneurs are a risk-taking bunch. Creative, innovative and ambitious, they invest, re-invest and double down in their business. They give up liquidity in exchange for higher returns.

Adopt an investment mindset

Going forward, private company owners should use an investment mindset when considering how to grow their wealth. By adopting this investment mindset, the owner takes into account not just their business but rather the entire family net worth.

6 strategies for your business and your family wealth

1. Seek out alternative and supplementary revenue streams. For example, look at online sales, new customer segments, acquisitions, or alliances with a complementary business.
2. Reduce supplier concentration. Look for new suppliers who can provide your current or similar goods and services—or for new suppliers to provide new or complementary goods and services.
3. Take an objective, unbiased look at your business model—how you make a margin. Examine businesses that operate in different sectors, and adapt practices that could improve your model.
4. Establish a level of return you want to make on your invested capital. Be sure to include a ‘risk premium’ over and above the actual and opportunity cost of that capital. Then, when looking to invest in your business—capital, equipment, buildings, people—understand the return that investment will generate. If that return does not match or exceed your objective, consider a different investment outside of your business.
5. Work through your balance sheet. Look for ways to remove capital. These could include recapitalization with leverage or selling some equity to a third party or to management or family successors. With this capital now removed from your business, work with professional advisors to find investments that balance risk against your operating business.
6. Enhance your business. Critically look at your business weaknesses and opportunities with the assistance of an expert. Look for ways to enhance your businesses value through technology, more professional management, new or reduced product lines or any number of ways to ultimately make your business more attractive to a buyer down the road. I often partner with my colleagues at BDO who specialize in enhancing the value of a business.

COVID-19 devastated the economy. It will recover. Some businesses may not survive. Many others will manage through. We expect the best of these will be well positioned to thrive in the post-crisis economy. Entrepreneurs will continue to work hard, innovate, and be creative. Those who view their business through an investment lens will create true, sustainable wealth for their families and generations to come.

The full article is here.

Jacoline Loewen is a director at UBS Bank (Canada) and can be reached at [email protected] and 416-345-7012 and Twitter @jacolineloewen