Knowing the Value of your Business
Here’s a little scenario to kick off one of the next important steps to succession planning: You’re the owner of a small business and you’ve worked hard for many years to make it a successful, thriving company. You don’t plan on selling the business for another five years or so but the sale of your business is going to fund the majority of your retirement. You think you have a good idea of what your business is worth and you feel confident you will sell it for the asking price, when the time comes. Fast forward 5 years, you suddenly discover that value of your business is not what you originally thought or the sale of your business has come with unforeseen tax consequences. The retirement you imagined, has now been delayed or the lifestyle you had hoped for, is no longer achievable.
So, if you haven’t guessed yet, one of the most important pieces of succession planning is knowing the value of your business today and having a good idea of its worth in the future.
If you haven’t had a business valuation done, and aren’t sure what your business is worth, you’re not alone. Many business owners may feel they know the value, but the truth is, unless you work with a professional, you may be undervaluing or overvaluing your business. That’s why it’s important for you to stick with your expertise and source someone who is qualified to help you determine the fair market value of your business.
A Message to All Business Owners!
It’s crucial that you understand the after tax “in your pocket” value of your business and whether or not it’s enough to help you with whatever your goal is in the next stage of life – perhaps you are selling your business to fund your retirement, or the sale could be meant to tide you over until your next adventure. If that’s the case, is the amount you are receiving after satisfying CRA enough? If the answer is no, then you have to work on a plan to bridge the gap between what you have and what you will need. The gap could possibly be as simple as not paying unnecessary taxes through planning. A tax strategy should definitely be part of your plan, and should be revisited each year to maximize the opportunities to grow your business and your wealth.
Where should you start? You can get an accurate value of your business by working with your professionals such as an accountant and a certified business valuator to understand the value of business and your advisor to understand if the business sale will give you enough money to last through your lifetime. There are so many pieces to succession planning, not one person alone can do everything – by working with a team of professionals you’ll be one step closer to making your future plans become your reality.
Please visit our special resource page to download our free Succession Planning Guide and custom video tips.