Protect Your Wealth by Setting Your Own Terms

Seeking outside counsel can streamline the process and avoid costly mistakes as you transition your business

It has often been said that the most important transaction business owners will ever make is when they decide to exit their business. Bcbusiness recently discussed the topic with two experts in the field: Kellie Manchester, a partner with Sequeira Partners Inc. (which specializes in selling businesses); and Cindy David, President of Cindy David Financial Group Ltd., which helps entrepreneurs build and protect their wealth as well as retire on their own terms.

What are some key things owners should know about selling their business? KM: First off, everybody is going to exit a business: it’s not a matter of if, it’s a matter of when and how. And the process of selling can be much longer than you think. The actual deal process can take six to 12 months, and presale planning can extend that timeframe.

Is there a way of ensuring success? KM: Engage professional advisors to help manage a structured sale process, so the business owner can focus on continued growth in the business. There’s a lot of emotion tied to the selling process, and a professional can — among many other things — help sellers avoid the mistakes of acting upon these emotions, such as selling too soon or for the wrong reasons. I would also engage a professional early, in order to build trust.

When would a client work with an M&A advisor instead of an accountant? KM: Accountants help you with your accounting and financial records, while an M&A advisor helps you understand the broad range of sale options, especially with regards to exploring strategic options and alternative equity options. But the best success usually happens when a host of professional advisors come together: the sales process should include an M&A advisor and an accountant, as well as legal counsel and a financial planner.

What else should business owners know about the exiting process? CD: It consists of not one but three phases. The first phase is pre-sale planning involving the professional advisors Kellie mentions: this can take anywhere from five months to five years. Phase two is the actual transition in which the M&A advisor’s business acumen managing the sale process really comes into play. Then comes the final phase, which I call “life after the deal.”

What should happen during this final phase? CD: You might want to spend time with your financial planner and other experts to discuss the answers to a list of important questions: What do I want to do with the rest of my life? What will retirement look like for me? Do I want to provide for my children and grandchildren? What will be my legacy? All of these things can be measured and planned for.

So there are two ‘exits’ in a business owner’s life: one at retirement, and one at death? CD: Yes, and that’s why we say the retirement focus is about cash flow, tax efficiency, and transitioning assets in order to maximize or at least protect your estate. Every Canadian should be aware that everything you own is deemed to be sold upon your death, so there’s a lot of planning involved in that second sale.

So, ensuring you have a large nest egg isn’t good enough? CD: No. It’s also about planning ahead and making good decisions, especially from a tax perspective. And for the post-sale phase, it’s crucial to have a plan in which you deplete certain assets to satisfy your lifestyle needs and build up other assets for estate and legacy planning.

Disclaimer: Cindy David is the President of Cindy David Financial Group and Senior Estate Planning Advisor representing Raymond James Financial Planning Ltd. (RJFP). This article expresses the opinions of the author and not necessarily those of RJFP. It is for information purposes only. It is furnished on the basis and understanding that RJFP is to be under no liability whatsoever in respect thereof. It is provided as a general source of information and should not be construed as an offer or solicitation for the sale or purchase of any product. As with all planning strategies, you should seek the advice of a qualified tax advisor.