Live Cheap, Die Young Should Not Be Your Retirment Plan

Live Cheap, Die Young Should Not Be Your Retirment Plan

When we think of retirement, it is not “if” we retire, but “when” we retire. We are all going to retire some day, one way or another.

At MBS we look to our client’s “Value Gap” when we begin reviewing the retirement process. When is the best time to plan for retirement?  The day we start to work. When is the second best time to start to plan? Now!

We all have a “Value Gap”. A value gap begins with what we expect we will need as far as income in retirement, and the Gap is the difference between the assets we have now and the assets we will need at retirement to generate the income that we expect to need to live as noted above.

As you know we are big on planning. Life events happen. They happen to us all. Kids, mortgages, tuitions, health costs, vacations, job losses, marriage changes, you name it. No one is immune. But we need to balance these events as part and parcel of our life journey and maintain a goal. And we need a plan to reach our goal.

For many of our clients, their business is one of their most valuable assets and in most cases the asset that holds the key to the value gap. Every owner of a business should know what their exit strategy is. Every owner should understand that they will one day retire from their business. Every owner needs to know how to maximize the value of their business to be able to close that Value Gap and be able to achieve the retirement they aspire to.

You may tell us “my business is me, I cannot sell me”. True, in many situations the business is the owner and the value lies within the owner’s ability, know how or skill set. There are options here though. Either we find a way to transform the business to not be owner reliant, or, we look at the business as a long term asset and how do we maximize that asset so that it can generate more net income than the owners need to live on. We can then create a corporate structure towards a tax assisted “Nest Egg” in a holding company structure. Its complex, but this is what we do and we can do it for you.

We are focusing on Succession Planning for our business clients. Succession planning is a long process that should optimally begin at least five years before you plan to exit in reality, this timeframe shortens, but if you want to maximize the value you will get when you sell your business, hurry up. You do not want to leave money on the table that should be part of filling in your value gap.

You may want to transition the business to your family. Great! Did you know at least 70% of businesses transitioned to the second generation fail? And of the 30% that succeed, 90% transitioned to the third generation fail. These are not good odds.

All is not lost, a proper succession plan will look to creating  the most value for the exiting business owner and will look to create a business that will not fail in the hands of the new owners, whether family or a third party.

If you are a business owner, you will one day retire from your business. Talk to us and see if we can help you close your value gap and achieve the goals that you want for your retirement. Remember, in the next 10 years Canada will see the greatest transition of wealth from one business to another in our history. Let’s make sure we get our fair share of this transition.

If you would like to discuss the options for your business, we would be pleased to meet with you for a complimentary review of your situation and business value gap. We also have seminars on this. Contact us by telephone – 905 819-8035 or email – info@mbsfinancialgroup.ca for more details.

Harold Johnson, CPA, CA

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