Illustrations by Don Sparrow
Meet the Dilby family and Dilby & Sons Construction, founded in 1957.
Five family members own shares in the business:
daughter. She is an architect
and now designs and builds
homes as the head of Dilby
Developments, a profitable
business unit within Dilby
Construction.
brother in the family. He works
mainly with Annette as the
construction manager for Dilby
Developments. His true passion,
though, is running Dilby Outfitters,
a fly-in fishing and hunting camp
that is also under the umbrella of
Dilby & Sons Construction.
never showed an interest in the
construction industry. He and his
partner live in Calgary, where he
teaches high school biology. He
is, however, a shareholder in the
business.
Everything was falling into place at the start of the year. Negotiations were going well with the sale of the construction business. A number of family issues that had hampered prudent business decisions had subsided. Then covid-19 hit. The potential buyer stepped away from the table, having lost his appetite for aggressive expansion. The Dilbys and their businesses were adrift in the pandemic sea of uncertainty. What now?
Ian Braaten, who spent summers working on the family farm, says the Dilby situation reminds him of the end of harvest season, when the machine shop is a mess and needs some serious attention. “It’s the right time to clean up shop, take inventory, and get organized so you’re ready for the next busy season.” Braaten is a partner with KPMG Enterprise, dedicated to private enterprises. He recommends that the Dilbys do a 360 Diagnostic, a free service that examines the different aspects of business such as tax planning and corporate structure.
For example, when the failed buyout offer was made, the Dilbys were actually not in the best position to sell, something a pre-sale Diagnostic would have clearly revealed. Looking to the future, to meet the retirement needs of the elder Dilbys, one option identified would be to move the office building housing the construction business, and owned by the Dilbys, to a new legal entity so it could then be retained by John Dilby and rented back to new owners. That would produce additional ongoing income for the senior Dilby and his wife, over and above the proceeds from the sale.
The Diagnostic would also look at financial reporting, which the Dilbys have been unhappy with for some time. Delays in filing tax returns on some of John’s American interests last year cost him a interest and penalties of over $10,000 imposed by the US Internal Revenue Service. Greater accuracy and efficiencies in financial management throughout the Dilby companies would also yield reliable data that could uncover wasteful practices in other areas. In the case of Annette’s company, during the years of rapid growth much of the focus was on making money, without regard to where money was being wasted. Identifying and eliminating those incremental losses are now critical to the survival of Annette’s business.
Experts have predicted that the majority of businesses coming out of the current covid pandemic will not reach the same level of success they experienced going in. It’s a reality not wished for, but certainly to be prepared for. Fortunately, Dilby Construction bid successfully on a substantial contract and looks forward to rehiring most of its skilled workers. Annette has shifted to doing major custom home renovations for upper-income families who have decided to upgrade their homes rather than, for example, buy a lake-front cottage.
For Julian and his fly-in fishing camp, the story is much different. Travel restrictions have prevented the annual return of his lucrative corporate guests, especially those from the United States. The precarious financial situation is beginning to increase tensions between Julian and his brother Jacob, who doesn’t like the fact that if Julian fails in his obligations to the bank, the construction business will be liable for the losses. With professional assistance, each of the Dilby businesses could be restructured to address serious issues such as cross-liability, which could hurt not only the business, but also family relations.
The Dilbys, like thousands of other business owners, realize how important IT has become in 2020. In a state of near-panic and with no prior research, the Dilbys bought 30 laptop computers on a Monday morning just after self-quarantine restrictions went into effect, hoping this would ensure their key employees could work effectively from home. But that snap decision also meant they had to take stop-gap measures to keep their IT system from overloading. Now they are finding that many of their employees are hesitant to return to the workplace, preferring instead to continue working from home. Furthermore, even when the pandemic lifts, it is obvious that the old days of the loyal employee coming to work even when sick are over. Even the slightest symptoms of a cold or flu will force employees to stay at home, but they may be able – if properly equipped – to still get their work done without jeopardizing the health of their co-workers. A thorough examination of the Dilbys’ IT system and requirements is essential to meet these challenges.
“The COVID-19 pandemic has forced many businesses to find better and different ways to succeed,” says Braaten. Today, the key to survival is the ability to adapt. With the aid of a thorough diagnosis, the Dilbys might find out how.
All names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), businesses, places, buildings, and products is intended or should be inferred.
First published in the September 2020 edition of The Business Advisor.