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Prepare Your Business For Sale
Only 9% of business owners have a documented transition plan in place and yet 70% of small business owners plan to transition in the next 10 years*! As a financial planner I continue to meet business owners who are planning to sell or transition their company but they do not have a plan. Typically they are either unsure of the process, so they procrastinate or the business is their baby and they do not want to let it go. It is understandable that a major decision like this is hard to make, especially without someone to assist you.

When a business owner is considering selling here are some things to consider:

1. Don’t Leave the Party Last – You see this with professional athletes when they face the question of when to retire? In my opinion you are either growing your business or it is shrinking it, there is no standing still. A lot of business owners later in their career can get into maintenance mode, which usually means the business is starting to decrease in revenues. At first the revenues may hold but after a couple of years you typically see them start to decline. If you want to maximize your selling price and be attractive to potential buyers be careful to wait too long.

2. It Takes Time – Selling a business can take you longer than you think. You need to find the right candidate to take over your business. You are looking for an individual that is an entrepreneur; remember there are more employees in the world than business owners. Also, in most transitions the current owner is asked to stay with the company to assist with the passing of the reigns. You should plan for 1-2 years to sell. This means you should be creating a plan 5-7 years prior to your planned exit.

3. Change – Every industry is faced with changes due to technology, regulatory, competition, etc. If you owned a video or record store in the 80 or 90’s, when was the best time to get out? What if the technology that Google is working on to make it so that cars drive themselves eliminate car accidents in the future. Could that affect you if you own an auto body business? What changes face your business?

4. Financials – Often times the financial statements for a business are ignored until it is too late. Yet they will play a very important role in the sale of the business. You want to make sure that your financials present the best view of your company so that a potential buyer is enticed to make an offer.

There are many things to consider when selling a business. The first is to get a professional that can assist you with putting a plan together to ensure that you maximize the value, save tax, and control when and how you sell your business. As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

Questions?

*Source – http://www.advocis.ca/Update2014/index.html

 

The Most Overlooked Risk
What is your biggest asset? Most people might answer your house, boat, car, or investments. When in fact it is your income and your ability to earn a living.

When I review a person’s financial situation, one of the most common areas that is overlooked is to protect their ability to earn a living. Disability insurance is a critical part of a person’s risk management plan. When you think about all of the things that people have insurance for, cars, houses, electronics, death, etc. Unfortunately if you do not have an income all of these other areas fall apart.

When it comes to managing risk, a financial planner looks at two main factors:
1. Risk – what is the chance of this happening?
2. Impact – If it does happen, what is the potential damage?

As an example, the risk of a house fire is low but the damage it can cause financially is extreme. Hence why people buy home insurance.

The Risk Is High:
Did you know that 1 in 3 people, on average, will be disabled for 90 days or more at least once before they reach age 65?*

The Impact Can Be Severe:
How long could you survive for without your income? Most families could last maybe 4 to 6 months before they would have to start selling other assets such as investments or their home. How would you survive till age 65 and then into retirement?

The main way to manage this risk is to have long term disability insurance to protect yourself in case of an illness or injury.

Possible Options:
1. Canada Pension Plan – This will only pay for the most severe disabilities and the amount is small.
2. Worker Compensation – This only covers you if it is a work related injury.
3. Group Plan – This is how most Canadians are covered. IMPORTANT! You should have your coverage reviewed to make sure you are properly protected.
4. Individual Plan – You can purchase this through the major insurance carriers.

Key Facts:
• If you are an executive or earn over $80,000 per year and you have group coverage you should have it reviewed, as you may not be fully protected.
• If you have group coverage your plan definition typically will change after 2 years of being disabled. This can allow the insurance company to decline your coverage if your disability is not severe enough. This is done to keep your rates lower for your group plan. You can get individual insurance to protect against this.
• The definition of a disability policy is critical.
• Most disability insurance is designed to cover you till age 65; some may have only a 5-year benefit period.

As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

 

Questions?

*Source – “A guide to disability insurance”. Canadian Life & Health Insurance Association

 

Did Your Pension Move When You Did?
Do you have a UK (United Kingdom) pension? There are a good number of British expatriates who are now Canadian residents that have pensions back in the UK. Have you forgotten about that plan from an old employer? Do you know your options?

When I create a retirement plan for a client I review what savings and pensions they may have. Quite often, past pension plans can be forgotten or misplaced, so this exploratory part of the process is critical so that nothing is missed. Read more

That Is The Question
Should we downsize our house? If so, when? Maybe never? I think that downsizing too early or without planning can be one of the most costly retirement mistakes. I have seen couples that have downsized, found that they have not liked it, and then purchased a house similar to what they originally owned. The cost to do so was thousands of dollars. Read more