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How to Proactively Plan for Retirement

Part 1: Transitioning your business

In this first installment of a weekly series, Tax Advisor Mary Ann Donahoe discusses some key areas to consider when preparing to sell or pass on your business

At MRSB a core concern for our clients is whether they are taking the steps necessary to ensure a smooth transition into a comfortable, worry-free retirement.  No one wants to scramble at 65 to make ends meet or be up to their necks in paperwork. You’d rather be on a beach or a boat somewhere, celebrating a successful career in style! Well, this dream isn’t attainable for everyone, but for the owner of a profitable business it should sure be the goal.

...each engagement is tailored to the individual client and their business; this leads to recommendations that help ensure a smooth transition into retirement.


After countless client engagements on the topic of retirement planning we have identified several areas that many business owners either have questions about or haven’t started thinking about yet. To address this our tax and accounting teams have developed a unique meeting style approach to retirement planning. The Comprehensive Review & Tax Planning (CRTP) process encompasses a number of areas of concern for business owners and is unique in that each engagement is tailored to the individual client and their business; this leads to recommendations that help ensure a smooth transition into retirement.

This series will identify and briefly discuss several topics that every business owner should consider, and that are covered at length during the CRTP process. This week we will start with transitioning your business.

Who will take over?

Have you thought about who is going to keep your business running once you are ready to pass on the torch? There are three main options: you might decide to sell or pass the business on to your children, sell to current employees or sell to a third party. Each of these options requires careful planning to ensure the transition happens on schedule (i.e. when you actually want to retire) and that the business is ready for its new owner(s).  Even if you are years away from this decision, it isn’t too early to make preliminary plans.

Selling or giving to children

In our experience a majority of businesses transitions are family transitions, meaning the company is passed on or sold to children or other family members. If selling to more than one child, have you decided how ownership will be split between them? Will you be transitioning wealth to any non-participating children?

It’s also important to think about whether your children are ready for the full responsibility of owning their own business and whether they require any training or mentoring beforehand. Instead of selling the business outright you may decide that a slow transition is a better option. In any case, there are tax issues to be taken into account to ensure that everyone receives the maximum tax planning benefits as a result of the transition and that the business remains strong.

It’s also important to think about whether your children are ready for the full responsibility of owning their own business and whether they require any training or mentoring beforehand.

Selling to current employee(s)

One option that can be very beneficial to you and the business is to sell to an interested employee, which eliminates the need to find a buyer. Some of the same

 considerations as when selling to children need to be analyzed if it is an employee who wants to take over the business, such as whether they are ready for full responsibility and whether they require mentoring.

The financing arrangements in an employee take-over are different than when selling to family, and can vary depending on the wealth of the purchaser. If your employee has enough capital to purchase the business outright, fine. But do you want to do this knowing that there will be no gradual transition period? If your employee doesn’t have the capital, are you OK with doing a partial transition of business? Would you consider a vendor take-back? These are all answerable questions, they just require some careful consideration of all available options.

Selling to a third party

Selling your business to an outsider is often the most demanding course of action as it requires extra diligence on your part, both to protect yourself and the buyer. Even finding the right buyer can be challenging, and hiring a broker might be a necessary step as they can not only find the buying party but assist you throughout the selling process.

A key consideration when selling to a third party is whether there is opportunity for you to enhance the value of your business, resulting in a better asking price. A business valuator can help you identify the key value drivers of your business and provide a solution for leveraging them. For example, identifying ways to improve cash flow, minimizing perceived risk for buyers and transforming personal goodwill into saleable goodwill are all areas a valuation expert can help with. Selling to a third party can also take considerable time so planning ahead is key.

A key consideration when selling to a third party is whether there is opportunity for you to enhance the value of your business, resulting in a better asking price.

The above are just some of the steps and considerations we walk you through in our CRTP meeting, all of which lead to the development of a retirement plan that works for you. Of course, every business is different and you may feel you need further advice on any or all of the above, or on something we haven’t covered yet. Next week’s post will discuss tax and estate planning and how these might factor into your future business plans. 



Keeping it confidential

Sometimes secrecy is a good thing, especially when planning the sale of your business in a small community. M&A Advisor Trisha Mossey, CPA, CA gives some tips on how to keep things hush-hush during this crucial business transaction

One of the charms of living in Atlantic Canada is that many of our communities are close-knit. That is to say, your neighbors, coworkers and friends know a little more about you than you’d sometimes like to share. Not to imply that you’re up to no good! But if you were, they’d probably know about that, too.

When you’re a business owner there are many things, small and large, that you need to keep private (employee compensation immediately comes to mind). But especially when you’re planning to sell your business, confidentiality is critical. 

Why so secret?

There are a few ways in which lack of privacy can harm your business (if your response is that you won’t be the owner for much longer, think about the value you want your business to retain as you get ready to sell). For one thing, rumours of a sale or acquisition can cause insecurity and instability among management and employees; they may look for other opportunities or devote less of their energy toward the success of the company if they feel its future is uncertain.

It is also important to maintain confidentiality with respect to clients and customers, who may take their business elsewhere if they feel yours is on uneven footing. They may also be hesitant to bring new business your way if they think you are undergoing significant organizational changes that could limit the attention or care you give to clients.

What you can do

First of all, resist the urge to spread the word. Telling employees, suppliers, even too many family members and friends about your plans to sell can be a recipe for trouble. You don’t want to stir a pot that’s already bubbling away nicely, and you really don’t want to be approached with questions from worried staff when you are unable to provide all the answers yet.

To limit the amount of gossip that goes around and to make sure idle ears aren’t hearing things they shouldn’t, avoid holding important meetings in your office regarding an upcoming sale or merger. Even if no one hears what’s being said between you and the potential buyer, people may jump to the obvious conclusion.

Working with a broker or advisor can assist with privacy concerns and significantly lessen the time put in by you. Remember, the process of selling or merging your business can take months, even years. An experienced M&A advisor will handle this side of things competently and save you hours every week in the process.

What you should look for

There are several ways that M&A firms or brokers can ensure your transaction is handled as confidentially as possible. One area of obvious concern is the storage of data and personal information relevant to your business. At MRSB Mergers & Acquisitions we take the storage of information seriously, using stringent folder permissions to ensure that only designated team members have access on a need-to-know basis. MRSB also makes use of a secure virtual data room for sensitive client information. Potential buyers are invited by M&A staff to log in to view specific information regarding the seller of interest. Buyers are required to sign a confidentiality agreement prior to gaining access to any seller information.

Another concern, as mentioned above, is how to hold critical meetings leading up to a sale when there is real potential that others will become wise to your plans. On the part of your broker or advisor, a private boardroom used only for M&A clients is one good way of heightening privacy. Another is to have access to more than one entrance so that clients can arrive and leave separately. MRSB’s M&A division is housed in its own section of the office, with a private boardroom and access to both front and back entrances. It may seem unnecessarily cautious at times, but clients who require this level of privacy (and many do) appreciate the extra steps taken to ensure it.

Living in a small town, news of an important business sale will always spark the interest of local entrepreneurs, clients and even your neighbors. This can be a very good thing, depending on how fast you want to sell and how many potential buyers you want to attract. Finding the balance between this natural form of promotion and keeping things under wraps is a fine balance – one that MRSB M&A advisors are keen on achieving. 

MRSB set for this year's Stuff for Students campaign

What is Stuff for Students?

This campaign is a yearly call for Islanders to purchase and donate school supplies for students in need on Prince Edward Island. Around August 1st the Admin Team at MRSB will be placing a big, empty cardboard box in our lunchroom and inviting staff – and anyone else who would like to get involved – to drop off school supplies and non-perishable lunch food items.

Why do we do it?

Despite our small population there are many kids on PEI who unfortunately aren’t able to pack a sustaining lunch for school or to own a full set of school supplies. We have been taking part in this campaign for several years and always get a great box full of ‘stuff’.

What gets put in the box?

Notebooks, binders, pencils and pens, erasers, glue sticks, markers and non-perishable lunch items are all common donations. Some like to get a little more generous with backpacks, calculators and lunch bags/boxes. Anything a student could use day-to-day, really!

How do the items get to the students?

Typically at the end of August the box is delivered to a community drop-off location by our Admin Team, after which all community donations are distributed to families in need. 

How can I get involved?

Anyone is certainly welcome to drop off items to MRSB’s lobby or to a communal drop-off location. Keep your eyes and ears out for more information via local media.