Pro­tect Your Wealth by Set­ting Your Own Terms

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

BC Business Magazine - - Cindy David Financial Group Ltd. -

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.

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