Vistance Capital Advisory
77 Harbour Square, Unit 1408 M5J 2S2 Toronto, ON, Canada

On Tuesday, September 8 at 11 AM EST, I will be joined by David Lewis, a professional EOS implementer for an interactive discussion on executive leadership with plenty of Q&A. Register below. Are you running a small business and sometimes feel like your company is stuck in neutral? Are you finding that you are constantly putting out fires? Does it feel like you have a really hard working team, but things still don’t seem to get done? You are not alone. Once you have passed th...e start up stage, the transition to growth is a difficult one and only gets more complicated as you increase your headcount. Daryl Ching and David Lewis will be hosting an interactive session to discuss some of the key factors that lead businesses to succeed. It is easy to believe that success can be determined by the size of the market, how great the product, or the credence of the go to market strategy. However, we believe the most important indicator is leadership within the management team and the ability to execute on a well thought out business plan. We will discuss the attributes observed across small businesses that have ultimately resulted in success and attributes observed that have led to failures. Join us for this interactive session.

Work from home tax deductions for business owners and employees This post applies not just to business owners but to anyone employed and working from home. The current rules requires the employer to fill out a T2200 form certifying that working from home is a condition of employment. However, it appears that requirement may be lifted with the COVID pandemic. The general rule states that if employees work at least 6 months of the year from home, you can claim certain expenses ...as tax deductible including office supplies, utilities, cleaning and rent. It remains unclear whether CRA may relax the 6 month requirement given the current pandemic. So keep all your receipts this year. As we get more clarification from CRA, we will keep you all posted on developments.

In the wake of COVID back in March, we saw mass layoffs and helped our clients with the process, providing them tools for communication on government programs they can pass on to terminated employees and issuing ROEs. When the wage subsidy programs restarted, our clients sought our advice on hiring - whether they should hire the same people back or tweak their org structure or even consider looking for new people. Within a couple months, it became pretty clear which remaining... employees were stepping up and able to take on more responsibilities. Some will jump at an opportunity like this to take on new roles and others will drown in the chaos. It also became clear that some positions were clearly redundant or overlapped because companies did not see a drop off in output from certain people leaving. It was clear some individuals were underutilized and some individuals were not carrying their weight. COVID has provided a great opportunity for CEOs to reevaluate their entire HR structure and people. I have always stressed that the people you hire is the most important decision a CEO can make. Based on the conversations I have had recently, I am reposting an article I wrote over a year ago about how to hire effectively for small businesses.

Federal Relief Update, The Canadian government has announced the wage subsidy program will be extended to December. This is an attempt to get Canadians back to work and reduce the number of people relying on CERB, which has seen almost 19 million applicants making up over half our entire population. In our opinion, this is the right move by the federal government. We have consulted several businesses that have informed us that it has been very difficult to fill part-time and ...full-time positions as job applicants elect to stay at home and collect $2,000 / month. However, we do feel there needs to be more tweaks to the eligibility criteria for CEWS. With a hard and fast rule of a 30% reduction in revenue, businesses have lost incentive to push business development activities in fear of being disqualified for wage subsidies. In our view, a tiered system similar to income tax would be a much more effective program so more businesses can qualify for CEWS and would be incented to generate more revenue. However, this is very welcome news from the Canadian government and certainly a step in the right direction to get Canadians back to work.

Thank you everyone who has watched the webinar and submitted questions. The most commonly asked question is how to apply commonly used valuation methodologies taught by business courses and how valuable an independent valuation report from a CPA firm is to complete a capital raise. There a number of business courses out there that teach methodologies like the discounted cash flow model, revenue and EBITDA multiples based on public comparables and acquisitions and intrinsic va...lue. In my opinion, these courses are great for a high level understanding how valuation works and to a certain extent work for large mature businesses. However, these methods are inapplicable for early stage businesses with less than $2 million of revenue or are haven't reached profitability. Therefore, a valuation report using these metrics does not provide much value. I have completed courses and read books on valuation, but 90% of my learning has been through experience completing multiple transactions. Each time I complete a capital raise or acquisition, I learn something new as different investors place emphasis on different factors in their evaluation. There is simply is no replacement for experience and the best way to learn valuation is to get involved in many transactions as possible.

Truly an inspirational story and a game changer for capital raising. Ghassan and his team at EMERGE Commerce successfully raised $9 million in connection with their IPO announcement without a single face-to-face meeting. Just imagine all the time and money entrepreneurs can save without having to fly all over the world to pitch for capital. We will certainly be learning from this experience to see how we can revise capital raising strategies for our clients.

Dear friends, family and colleagues, Thank you Rostie Group for hosting the first of a series of webinars yesterday, "What Is My Small Business Worth?" where we discussed valuation for early stage businesses from the perspective of investors and how to prepare for a capital raise or sale of your business. Thank you to all the participants who joined and asked questions. For those who weren't able to attend due to a timing conflict, fret no more. Here is the link for the video.... The content is about 30 minutes followed by about 15 minutes of Q&A. We plan to host a series of webinars for small businesses, so we would appreciate any feedback on any content that you would like us to do a deeper dive on. We certainly hope you find great value in the content and I am more than happy to answer any specific questions if you would like to message me personally. Thank you again for everyone's support.

As a final reminder, I will be hosting a webinar to discuss the valuation process for small businesses with respect to raising capital and mergers / acquisitions at 11:00 AM EST tomorrow. If you are interested in attending, please register at the following website today. Thanks,... Daryl

As a friendly reminder, I will be hosting a webinar to discuss the valuation process for a small business next Wednesday, July 8 at 11 AM. I will be discussing generally accepted guidelines by the angel / VC community for early stage businesses in all industries. To participate, please register at website below. Look forward to speaking to you next week.

Dear friends, family and colleagues, In partnership with Rostie Group, Vistance Capital is proud to announce the launch of a series of webinars on capital raising for small businesses. The following short video provides a teaser for the the first webinar - "What Is My Small Business Worth?" to be presented on Wednesday, July 8 at 11:00 EST with a presentation plus Q&A. This is one of the questions I most frequently get asked. If you are operating a small business, you have li...kely thought raising capital through the issuance of shares in your business, have been approached about an acquisition or have considered a partnership that involves some form of an equity swap. There are some general misconceptions that hiring an independent valuator to run a discounted cash flow model and public comparables is a sufficient process. However, if your business is at an early stage and if you have not generated profit yet, the valuation process is actually much more complicated. Join me on July 8 where I will be provide a presentation to discuss the key considerations for valuation for early stage businesses and what you can do to ensure you put your best foot forward to 1) successfully complete a transaction and 2) receive the the maximum valuation possible. Based on your feedback and interest, we plan to launch subsequent webinars on topics that are relevant for your business. I look forward to speaking to you on July 8.

Capital Raising Update I have reached out to a number of my contacts in angel and VC networks to gauge the capital raising environment for small businesses. Most angel networks have moved from conference settings to video pitches and some in fact have reported more participation by investors due to the ease of video conference. However, most networks continue to report a sharp decrease in deal flow. There are many investors still sitting on the sidelines waiting to see the re...sults of reopening businesses. However, a number of investors that remain active have seen this as an opportunity to invest in great companies in a period where there is lack of supply of capital. For active investors, COVID has been a true test of adaptability and character for entrepreneurs. Businesses who have pivoted their business model to generate new sources of revenue in this environment are being rewarded. To quote a friend of mine, "It's not the big eating the small, rather it's the fast eating the slow." The expectations are also higher on the quality of the investor materials, as investors have the luxury of declining deals that demonstrate any weakness or lack of thought. We are highly encouraged by the news that markets are opening up again for small businesses.

Small business owners, if you have not completed either your annual corporate tax filings or HST filings due in June and need them completed in an expedited basis, please feel free to message me. It is vital to keep your financials up to date and remain in good standing with CRA, especially if you plan to apply for any financial stimulus programs or lending moving forward.

Great news for owner-operated businesses and sole proprietors, Trudeau announced expanding the eligibility criteria for the Canada Emergency Business Account (CEBA) $40K interest-free loan to businesses that previously did not meet the criteria, which required $20K to $1.5 million of payroll in 2019. This excluded sole propreitors or unincorporated individuals, as they often declare business income as opposed to salaries. Typically, this hurts small retail storefronts, seaso...nal businesses, and small medical practices like clinics. For businesses with less than $20K in payroll, the new eligibility requires: - a business operating account at a participating financial institution - a Canada Revenue Agency business number and to have filed a 2018 and 2019 tax return - eligible non-deferrable expenses between $40,000 and $1.5 million, which can include costs like rent, property taxes, utilities and insurance. It is our opinion that the new criteria is very inclusive and now provides access to virtually all small businesses regardless of how they are structured. We believe CEBA to be one of the best programs to help small businesses as it provides a $10K loan forgiveness if the loan is repaid by December 31, 2022. We applaud the federal government for getting this right.

Tax filing and payment deadlines for businesses & extension of Canada Emergency Wage Subsidy Program: For those who have put off completing 2019 annual tax returns due to the COVID extension, the deadline is approaching very soon on June 1, but corporate tax payments are not due until September 30. The deadline to file quarterly HST have not changed but HST payments due between March 27 and June have been extended to June 30. However, HST filings must be completed before June... 30. There is a very short window left to get your financials up to date. Please make sure you do not miss the deadlines and stay in good standing with CRA, especially if you are applying for government relief programs. It was also announced that the Canada Emergency Wage Subsidy program (75% wage subsidy) will be extended 3 months to the end of August. The federal government is recognizing the importance of keeping Canadians employed, to reduce the applications for the CERB program. This is welcome news and should provide businesses some well needed additional relief.

A story of how we and our clients have adapted through the wake of the COVID crisis and will likely come out stronger on the other side

Disappointing Rent Relief Update The federal government working with the provinces and territories have announced the Canada Emergency Commercial Rent Assistance for small businesses. The government will be providing forgivable loans to commercial property owners to cover 50% for 3 months of rent from April to June. The commercial property owners are asked to cover 25%, with the remaining 25% to be covered by the small business tenants. However, the eligibility criteria makes... it impossible for many small businesses to access this facility. To be eligible, a small business must have either ceased operations or have experienced a 70% drop in revenues. Therefore, this program really applies to brick and mortar operations such retail stores and restaurants that have had to shutter storefronts. While this program is goes a long way to ensure that that businesses that have shut down have a fighting chance of coming back to the market when businesses reopen, this does nothing to address all the small businesses that continue to operate but have not seen a 70% drop in revenue. A vast number of struggling small businesses continue to be locked into lease agreements that they cannot break, paying full rent for offices they are not using. See more

https://www.theglobeandmail.com//article-ottawa-expands-in Relief Government Stimulus Updates The Canadian government has made a number of new announcements today. The Canadian Emergency Business Account $40K interest-free loan has decreased their threshold of minimum annual payroll in 2019 from $50,000 to $20,000. This should help a number of small businesses that were not previously eligible (sole proprietors, hire contractors). ... However, the big news today was the announcement of the Emergency Commercial Rent Assistance program. While some of my colleagues have successfully negotiated lower rent, the majority of small businesses like ours are stuck in commercial leases paying full rent for an office space that we will not be able to use for the next few months. After payroll, rent is often the second largest expense for small businesses. We will be keeping a close eye on this program and will provide details as they become available. We believe this is an extremely positive and necessary development. Especially for retailers that have had to close down shop and have managed to lay off staff, rent is the one large expense that continues to chip away at their equity in a period of little to no revenue. This will give them the ability to reopen when Canada is open for business again.

Message to our bankers from small businesses: We have enjoyed our relationship. You have been good to us and facilitated our growth through the good times. Circumstances have changed and we need your help now more than ever. Please stop directing us to the BDC / EDC and other government stimulus programs. The Canadian government has clearly drawn a line in the sand and is not there to support small businesses as they claim. Please stop telling us that you will be there when t...here the COVID storm clears and we are back on track, a time when every financial institution will be there knocking on our door. Throughout our relationship, you have preached a long-term partnership. This is the moment when we learn who our partners truly are. You are our last chance. We need a small loan to get us through this rough period to salvage our business. If you were being sincere when you told us that you believed in us and wanted grow with us, then you should believe that we will come out stronger on the other side. This is best opportunity to truly solidify our loyalty and a long-term partnership. We will remember those who fight for us and stick their neck out for us today.

Vistance Back in the Press Again Along with two of our clients who were rejected for loans by the BDC, we shared our insights with the Financial Post to discuss the difficulty of qualifying for BDC's BCAP facility. Despite the website stating that businesses need to be "revenue generating" and "financially viable prior to the impact of COVID-19", they have been been rejected for the reason of not being profitable. In fact, in Flashfood's case we were told at first the rejecti...on was due to not being cash flow positive, and when we proved that they were, BDC changed thier response to not EBITDA positive. When we asked the BDC to redirect Lunata's application to the small business loans group, we were told that the BDC has shifted all their resources to the BCAP. So let me get this straight. The BDC's response during a pandemic is to shift all their resources to a loan program that only qualifies profitable businesses and shuts the tap on any programs that can provide support to small growing businesses? This goes completely against the message coming from our federal government that they are out to support small businesses. Any small business in growth mode, that is investing in sales and marketing, R&D and staffing for future demand is likely not profitable. Again, speechless.

Canada Emergency Business Account $40K interest-free loan is now active on most banking websites. This is generally a very inclusive program requiring total payroll in 2019 to be anywhere between $50K to $1 million. If the loan is fully paid by December 31, 2022, there will be a forgiveness of $10K. If it is not repaid on time, it converts into an a 3-year installment loan at 5% interest. The application process is very simple, requiring you to enter your name, CRA business n...umber and total gross payroll in 2019 in accordance to your T4s. If you qualify, you should find some time to complete the application today. As the CBC article states, businesses that are set up as sole proprietors that declare business income rather than salaries do not qualify for this program. This is quite common for consultants, shopkeepers and seasonal businesses. Some of these businesses elect to take on consultants rather than hiring full-time employees. This is very unfortunate because a number of these businesses that have essentially shut down are still have to pay expenses they can't get out of like rent.

Free wage subsidy calculator to all small business owners, Whether you qualify for the 75% wage subsidy or not, the 10% wage subsidy is still applicable for all businesses that are eligible for a small business deduction and can be applied against your next payroll remittance due April 15. The program is retroactive March 18 and any benefit you receive from this program would simply be reduced from the 75% wage subsidy program if you qualify for that program as well. Please take advantage of this program and do not leave money on the table. Vistance Capital Advisory has created a template in Excel that calculates the maximum subsidy and provides the amount of tax to remit for each period based on your current payroll. We are providing this template for free to all small business owners. Please send me a message if you are interested.

The Canada Emergency Business Account $40,000 interest free loan for small businesses officially opens today, which can be applied for through your financial institution. We are getting up to speed, figuring out the intricacies and helping our clients apply. It is likely that any loan program will require a business plan and 12 months financial projections. There may be some light at the end of the tunnel on the 75% wage subsidy program. It appears the government has heard fr...om the small business community about the gaps in the eligibility criteria (a list I provided in one of my previous LinkedIn posts). A survey conducted by the Council of Canadian Innovators found 94% of respondents do not qualify for the program. The government may be tweaking the criteria to make it easier for small businesses to become eligible. We will keep our fingers crossed for some positive changes. In a Financial Post article, John Ruffolo, co-founder of the Council of Canadian Innovators recommended that the banks administer the wage subsidy program to expedite payments, rather than the CRA, which can take 6 weeks for cash payments. We feel is a sound recommendation and would vastly improve the speed of execution.

I have had many conversations now with small business to digest the newly announced 75% wage subsidy program. While the 10% wage subsidy, wasn't enough, it was easy to access for all small businesses. With respect to the new program, there are a number of flaws with the 30% revenue reduction requirement, making it very difficult to access the facility. - A large number of businesses that rely on social gatherings like restaurants and have felt the immediate impact in revenue ...have shut down and a wage subsidy will not incent them to hire people back - For businesses that have grown from 2019, it is very unlikely that they will qualify, as a reduction in current revenue might make them flat year to year - Contracts are being cancelled with 30-60 days notice. This does not result in an immediate drop in revenue but the impact will be felt later, possibly at a time when the subsidy period expires. - Decline in revenue ignores cash flow. Customers are asking for extended payment terms. Big box retailers are gouging small businesses extending payment terms by up to 60 days putting a strain on cash. - There is growing uncertainty about whether clients will be able to pay their invoices. - Businesses that sell products through the retail channel have lumpy sales, with large purchase orders in one month and sometimes zero in another. The 30% decline threshold will completely arbitrary and random at best. Conclusion: The majority of small businesses that have grown from 2019 will likely be ineligible for the 75% wage subsidy. There are 1.1 million small businesses in Canada and we employ 70% of the private sector. Are we a country that promotes entrepreneurship and innovation or are we not? Does the government understand the risks and sacrifices entrepreneurs make to build a business, taking second mortgages on homes and receiving no salary for years? The federal and provincial governments continue to let small businesses down with every announcement. Similar to the 2008 financial crisis, it is very clear their mandate is to bail out the largest companies in traditional sectors like banks, auto, oil and gas. It is really unfortunate that not much has changed in 12 years. Feels like Groundhog Day.

Business owners, I would like to hear from you. Have you attempted to apply for financing through the BDC, EDC or your bank post-COVID outbreak? How has your experience been? What feedback are you getting? Feel free to reach out to me privately as well. As one additional piece of advice, for those who have bank financing and have breached any covenants due to COVID, do not panic. You are not alone. The best thing you can do is to be proactive, put together a short term busine...ss plan explaining how you will be making adjustments to your business and what impact you think COVID will have. Complete 12 months of revised financial projections (do not submit the normal budget your completed in December or January) and reach out to your account manager. They will appreciate the heads up and work with you as long as you are transparent and are fully prepared with documentation. Do not hide and avoid their calls. This is the best way to preserve your relationship with your bank and ensure your line of credit or term loan is intact. See more

Terrible news for small businesses owners, Minister of Finance Bill Morneau has announced further details on 75% wage subsidy and has indicated that a company must demonstrate a 30% decrease in gross revenue year over year. Specifically, you must demonstrate your March 2020 revenue must be 30% lower than your March 2019 revenue. This eligibility criteria obviously eliminates any businesses that have grown from last year. As I suspected, the companies that will benefit from th...is subsidy are established mid to large size players that have had steady revenue streams and suffered an immediate setback in 2020. The government's rhetoric of creating programs to help entrepreneurs and small businesses has proven to be nothing but lip service, and it is very clear that we, as small business owners, are left to fend for ourselves. I am speechless at this point.

Vistance is officially in the news. We provided our insights to the Financial Post on the proposed 75% wage subsidy. We continue to hold our breath while we await clarity from Trudeau on how to qualify.

Important Notice to Business Owners, While everyone was cheering the 75% wage subsidy announcement on Friday, the follow up announcement from Trudeau provided vague a restriction about a 30% reduction in revenue, making it more difficult to access the subsidy. The 10% subsidy was more clear cut. The government threatened severe consequences if any business tried to abuse the system. Before you go hiring back your terminated employees or decide to keep staff on, we feel it is ...vital to wait for clarity from the government about how to calculate the 30% reduction, as it is currently subject to interpretation. Many businesses have not seen an immediate 30% reduction in revenue in March, but have clients reaching out to reduce fees and services, have been given 30 days notice of termination and have clients cancelling new engagements that were about to start. Businesses that sell product through the retail channel have lumpy purchase orders that fluctuate month to month, so it is difficult to map a trend. Is the 30% reduction month over month or year to year to factor in industries with seasonality? As another quick note, we were helping a client that uses ADP process the previously announced 10% wage subsidy when they were advised by ADP not to move forward until the government came out with more details. When my client insisted, ADP indicated they were not set up to hold back payroll remittances and were unable to fulfill their request. As a result, we are helping clients manually process payroll. There is a possibility your payroll systems may not be able to process the announced subsidies.