Go out on top

In our re­tire­ment and suc­ces­sion plan­ning guide, five en­trepreneurs share their strate­gies for ex­it­ing the busi­ness and set­ting them­selves up for life af­ter work

BC Business Magazine - - Personal Finance - by FRANCES BULA por­traits by TANYA GO EH RING and KAYLA HUGHES

Will Cadell isn’t the kind of per­son who was born think­ing he would start a busi­ness of his own. But when Cadell was 32, he gave up paid em­ploy­ment do­ing map­ping for the for­est in­dus­try to be­come a free­lancer pro­vid­ing the same kinds of ser­vices to mul­ti­ple clients. Seven years later, he has a thriv­ing web-map­ping com­pany in Prince Ge­orge called Spark­geo, 20 em­ploy­ees across the coun­try and a con­stantly evolv­ing strat­egy for where he wants to go with his team and his busi­ness.

And even though it’s a long way away and may never fully ar­rive for a “fid­gety” per­son like him, Cadell, a Scots­man who moved to Canada af­ter fin­ish­ing univer­sity, also has a plan for re­tire­ment. Some of it is stan­dard Cana­dian, like putting money into RRSPS. But for Cadell, it also means de­vel­op­ing a busi­ness that no longer re­quires his pres­ence. So he’s con­stantly hunt­ing for prod­ucts his com­pany can create that will live on their own.

He has one al­ready, Map­tiks, a mar­ket-in­tel­li­gence tool that al­lows busi­nesses to track what their cus­tomers are look­ing at as those cus­tomers in­ter­act with an on­line map that, for in­stance, shows real es­tate for sale. Cadell and his staff are try­ing to create more, while con­tin­u­ing to do the kind of in­di­vid­u­al­ized con­sult­ing he started his busi­ness with.

“The na­ture of con­sult­ing is that it’s per­son­al­ity-driven,” he says, pon­der­ing his life and busi­ness strat­egy aloud as he takes a short break from a ski va­ca­tion with his wife and three daugh­ters at Lake Louise. “One of the rea­sons for cre­at­ing a prod­uct is to have some­thing that doesn’t need us.”

As it turns out, Cadell, with­out re­ly­ing on the ser­vices of a busi­ness coach, lawyer or in­vest­ment man­ager to come up with that ap­proach, is do­ing ex­actly what those ex­perts say small-busi­ness own­ers should do.

“Most en­trepreneurs work their tail off just to buy them­selves a job,” says Ian Bur­roughs, a lawyer whose Van­cou­ver-based firm spe­cial­izes in small-busi­ness man­age­ment and suc­ces­sion plan­ning. “Of­ten what hap­pens, you have an in­di­vid­ual who is a go-get­ter. They start a busi­ness, and it’s a suc­cess. For 20 or 30 years, it’s their baby.”

The prob­lem: “They ne­glect to think ahead to ‘Why am I run­ning this?’ They get stuck in op­er­a­tional mode,” Bur­roughs ob­serves. “But the pur­pose of hav­ing a busi­ness is to sell it.”

Busi­ness own­ers need to do some of the same things that any adult in Canada would to pre­pare for the fu­ture. Spend less than they make. Put money away in both spe­cial­ized re­tire­ment and non-re­tire­ment in­vest­ment ac­counts. Cal­cu­late what pen­sions they will get from govern­ment or a pri­vate com­pany, if any. Un­der­stand what their cur­rent liv­ing ex­penses are and cal­cu­late what their fu­ture ones might be for the years left to them on the ac­tu­ar­ial ta­bles.

But their re­tire­ments—if and when they ar­rive at that point, with busi­ness own­ers be­ing con­gen­i­tally more in­clined to keep work­ing past 65—are com­pli­cated by other fac­tors. They need to plan to sell or tran­si­tion out of their busi­ness, and when they do it, they need a tax strat­egy to max­i­mize the profit they get to keep. But well be­fore that, they need a tax strat­egy from year to year that gives them the most for the long term. They also need to truly un­der­stand what their liv­ing ex­penses are.

That’s one of the warn­ings that Michael Preto hands out to his clients, along with the ba­sic need to make the busi­ness sell­able from the start: fig­ure out how much in­come you’ll need to re­place, es­pe­cially con­sid­er­ing that you’ve prob­a­bly mixed your per­sonal and busi­ness ex­penses to­gether for decades.

“Busi­ness own­ers have more work to do than the gen­eral pub­lic to re­place their in­come,” says Preto, a Van­cou­ver-based in­vest­ment ad­viser at Hol­liswealth, a di­vi­sion of In­dus­trial Al­liance Se­cu­ri­ties Inc. “Govern­ment pen­sions are the same whether some­one made $50,000 a year or $500,000. So they’ll have to re­place a lot more in­come. And it’s harder for them to un­der­stand what in­come they’re re­plac­ing, be­cause they have their per­sonal and busi­ness ex­penses all mud­dled up.”

Cadell un­der­stands that, too. Care­ful to sep­a­rate the two kinds of ex­penses, he’s set up a sys­tem to pay

him­self a salary and is­sue him­self a T4 ev­ery year. “It costs more… but it’s worth it,” says Cadell, who jokes that his busi­ness brings in “be­tween $1 mil­lion and $4 mil­lion a year” in gross rev­enue. It helps him en­sure that any fu­ture buyer of Spark­geo un­der­stands what the true costs are, in­clud­ing the founder’s wages.

Look­ing for an exit

Hun­dreds of kilo­me­tres to the south, Bill Broddy is mak­ing sim­i­lar moves, hav­ing learned some lessons from nav­i­gat­ing two pre­vi­ous busi­nesses and one re­tire­ment al­ready. In his ear­lier life in On­tario, Broddy, 64, a for­mer IBM Corp. em­ployee, had run high-tech busi­nesses, but they were pri­mar­ily con­sult­ing and ser­vices com­pa­nies—the kind that, as Will Cadell knows, are dif­fi­cult

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