5 Moves a Business Owner can take to protect his/her financial future 

When we look at a successful business, for a moment we all think “what a lucky guy/women” but what you don’t see is the investment of hard work, sacrifices, late hours, life-long saving…. all was put on line to start any empire you see today.

Question is how do we protect this empire from any unexpected change, here are 5 moves that would help you protect your empire:

1. Put Your Health First – Live a Healthy lifestyle: just because you are working long hours and carry stress for business, employees and clients, does not mean your health should suffer. For a healthy life style, all you need is a 30 mins window five days a week for some light exercise and limit your calorie intake to a 2400 per day (this is what an active human burns in a regular work day). If you indulge for a day, next day should be a designated day to reduce intake of calorie and increase the 30 mins to 45. Trust me it is that simple. I have sat beside a client who said take all my wealth just give me one more year to live….sad but the truth is no one can help you if that happens.
2. FRM vs. CRM -Your Family Time is Important – Any successful business person would have a great CRM (Client Relationship Management strategy) but do they all have a FRM? A business owner knows never to break a promise made to a client but do they always keep their promises made to their loved ones. By the way here, I would say that the family also needs to understand the commitment that this business owner has and design their personal time accordingly. A client of mine when found himself in trouble with family had to put aside Fridays and Sundays as his family days where his spouse had assigned & scheduled him duties such as gardening, family dinner, groceries and Gym hours. This worked and the family is happier than ever before.
3. Corporate Owned Pension Plan: if the business’ net income is over 250K per year, I would strongly recommend an IPP plan. When most corporate executives retire, they have a corporate pension that takes care of their slow down years. But a business person retires with the hope of having enough equity in the business. In most cases, business owners enjoy their work so much that they don’t plan to retire, however, health is fragile and has no guarantees. Sometimes you are forced to retire due to an unforeseen reason and this is when a guaranteed pension plan would take away your worry of having enough to adjust into new lifestyle. There are many other benefits to having a corporate pension plan with CRA called IPP which we will discuss in later articles.
4. Corporate Owned Life Policy: In an event that the business owner passes away prematurely, this type of policy can help resolve many issues such as instant cash for family, tax effective way of transferring corporation shares to heirs, making use of CDA account dividend transfer to protect business continuity. Need to mention here that many of our clients find out about this when its too late. For example a client who recently suffered a heart attack at the age of 57 is very much interested and willing but will not quality for full benefits under this program.
5. Growth is Good but Risk is Rotten: My finance professor at IVY used this fraise many times for us to understand why it is good to grow but not at the cost of unbearable risk. So here is a formula that would help in deciding how much growth is adequate: Equity – Liabilities – investment required for growth = cash flow required for at least 3 years for the new corporation including additional growth. If you can run the growth without suffering a cash stress for 3 years, you are good to go as a rule of thumb. “Cash is King”, many businesses shut down for not having enough cash to run the day to day operations and I would never want to see that happen to any of my clients/friends.

All the best and thank you for your kind attention!!

For further inquiries, please contact Seema Sharma MBA, CFP, CLU, CHS, at Wealth & Estate Financial Canada Inc. You may send your questions to seema.sharma@wefci.com or call 647-968-9334

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