Jonathan Woolfitt - Business Owner Families

Business Owner Families

When it comes to financial planning for your own business, the do-it-yourself drive and motivation that helped you propel your business forward is a huge part of your success. But, it may not serve you as well when it comes to the vast array of financial issues that your business creates. Professional and trusted advice often becomes necessary to ensure your continued success and to solve problems before they interfere with the business or family itself.

Jonathan works with a number of business owners, and has more than 20 years of experience helping them achieve their goals and build their wealth through each stage of their business.

What does retirement look like?
How do you plan to fund your retirement?
What should you do with surplus cash not needed in the business?
How do you organize your business assets in the most tax-efficient manner?
What type of capital protection do you require for your business and your family?

More than half of small to medium sized enterprise owners do not have a business succession plan. Selling the business is often part of a business owner’s retirement plan, so the valuation of the business and how they plan to sell, are very important aspects our team will discuss.

Business owners want their financial advisors to show them ways to keep their wealth that they have worked hard to create for themselves. They are looking for financial, tax, succession, and estate planning solutions. Retirement is very unique to plan as an entrepreneur. Learning how to balance between reinvesting into the business and setting aside money for personal savings is much easier with the assistance of an advisor who can guide you through this process.

Succeeding in business succession

Planning for succession in advance is imperative to maximizing your business’s eventual sale price, protecting the legacy of what you’ve built, transitioning your business smoothly and funding your future plans.

Watch this video to learn about the key elements of a successful business succession plan.

View transcript

As a business owner, it can be difficult to find the time to focus on your eventual exit from your business when you're focused on the success of your business, but investing the time now can pay important dividends later including a smoother transition and a well-funded retirement.

So how can you build a successful business succession plan?

First, consider your various exit options.

You may wish to keep your business in your family, but family dynamics can complicate things.

Often family businesses fail in the second generation, so make sure you carefully consider your family member’s ability to take on a leadership role.

If there is a potential leader in your family consider grooming them as soon as possible.

Another option is a management buyout.

Normally the management team already understands the business and is well-known to your customers and suppliers.

However, they may have limited personal cash, so you may need to offer a favorable purchase price or financing to close the deal.

A third exit option is selling to an existing business partner.

This can be an attractive option with a quick close, especially if you have a shareholders agreement in place which sets the terms for selling your business interest.

Finally, they're selling to a third party.

Generally., this is the best option for maximizing your sale price.

However, it may involve disclosing confidential information, in some cases to a competitor.

Whichever exit option you choose it's important to get ready in advance.

Here are a few things to consider to make your business more attractive to potential buyers.

Develop a deep and talented management team, expand and diversify your customer base, established consistent recurring and high-margin cash flow and lastly keep your information systems up to date.

Another important part of your business succession plan is your retirement plan.

For many business owners their business is their retirement plan, but often it can take longer than you'd like to sell your business or you may not get the price you thought you would so it's important to set some money aside outside your business for your retirement.

One way you can do this is to an individual pension plan or IPP.

An IPP is a special retirement plan for incorporated business owners.

It enables you to make higher contributions compared to an RRSP that are tax deductible to your business.

And finally make sure you have the right advisory team in place including your lawyer, accountant, banker and financial advisor.

To learn more about business,succession planning, I invite you to contact an RBC Wealth Management advisor today.

This video is provided by RBC Wealth Management for informational purposes only. The comments contained in this video are general in nature, and do not constitute legal, investment, trust, estate, accounting or tax advice. RBC Dominion Securities Inc.*, Royal Trust Corporation of Canada, The Royal Trust Company, RBC PH&N Investment Counsel Inc., RBC Wealth Management Financial Services Inc. are affiliated corporate entities and member companies of RBC Wealth Management, a business segment of Royal Bank of Canada. *Member – Canadian Investor Protection Fund. Please visit www.rbc.com/legal/ for further information on the entities that are member companies of RBC Wealth Management. ®/TM Trademark(s) of Royal Bank of Canada. Used under license. © 2021 Royal Bank of Canada. All rights reserved.