Wayne Carew, principal & senior advisor with MRSB Mergers & Acquisitions, lets readers in on a few must-dos before jumping into the role of tourism operator
If you are a would-be hotel, theme park, B&B, campground or seasonal restaurant owner, headlines like these probably get your heart racing: ‘Canadians eating out more than they cook at home’, ‘PEI campgrounds enjoy record summer’ or, ‘This is the year of the theme park!’. Ok, I made these up, but we’ve seen ones like them. While these highlights are definitely good news for local tourism, they by no means tell the entire story, especially to those who are considering getting into this thrilling but sometimes unpredictable business.
First, let’s talk a bit about financing. A financing institution’s willingness to lend you money to buy or start a business depends on several factors, not least of which is how long it might take you to repay what you’ve borrowed. It can sometimes be difficult as an owner to adhere to a short payback period because the cash flow period (the time during which your business is taking in more than it spends) can be as short as two to four months. Of course, if your campground or water park is so wildly successful during the summer months that you can easily spread that income over a year’s worth of payments, you’ll have no problem. But the taciturn business cycle that is so common to tourism operations, and so shrewdly approached by lenders, is not something to be taken lightly.
One potential solution to the problem of limited lending power is to go through a government agency instead of the bank or lending organization. If your business doesn’t fall into the ‘must see/must do’ category, securing a provincial or federal government loan or grant could be your ticket. Make sure to do your research, and to enlist the help of a consultant or advisor if you feel the application process is over your head or will take up too much of your time. Many government processes are highly competitive, so you will want to do it right the first time.
The Cavendish Boardwalk is just one part of a lucrative cluster of businesses lining this popular beach destination
I’ve spoken to many a would-be owner who had quite a glossy view of what owning that hotel or string of cottages would be like. Words like ‘idyllic’, ‘cozy’, ‘beautiful’ and even ‘relaxed’ slip into the lexicon like oars into the cool waters of a pristine lake. If you think I’m being a little too starry-eyed with my wording, it’s because I’m making the point that romantic language has little to no place in business ownership, just as it has a limited place in professional blog posts. As an old business colleague used to say, sometimes entrepreneurship can be “an affair of the heart, not of the head”. What this all means is that you as potential owner need to reel in the fantasies and focus on the realities of your potential situation. Sure, you may have the occasional sunny morning when you lean idly in the rustic doorway, sipping coffee and marveling at how wonderful life is. But you’re far more likely to be spending your mornings hunched over budget sheets, providing slapdash training to a new employee or fishing something slimy out of the kitchen sink – for the third time. As long as you’re ok with it not being all roses, you might just have what it takes!
Think too about whether the business you’re considering is part of an already fertile ‘cluster’. For example, Matt Jelley is a highly successful entrepreneur who chose the renowned Cavendish Beach area in which to open his newest operation in 2006, Shining Waters Family Fun Park. The businesses surrounding the park make up one of the most lucrative tourism stretches in Atlantic Canada, and each business lends itself to one other, so to speak. Families can spend Saturday at the beach, do some quick shopping, eat at one of the local restaurants that evening, then hit Shining Waters on Sunday before heading home to New Brunswick. Another piece to Jelley’s success story that shouldn’t go unmentioned is that fact that he already owned two theme parks in Atlantic Canada before launching his new venture. He knew the market, he had years of hands-on experience behind him and the funds to back it all.
One last thing to think about is how long you plan to stay in the business. Unlike flipping houses, flipping tourism businesses doesn’t work the same way. In my opinion, if you’re going to do it, do it for long haul. Make the most of the business over 10 to 20 years and leave it better than you found it. Teachers are often ideal candidates to own tourism operations as they make a steady income for working fulltime most of the year, then have a few months during which they can potentially devote their time to making a seafood restaurant, B&B or cottage getaway shine. And during months or years when the business isn’t exactly thriving, they can lean on their salary and wait out the storm.
This post isn’t meant as a doom and gloom forecast of what may happen if you aren’t perfectly suited to life as a tourism operator. After all, we live in a province that makes much of its income on people visiting our shores ‘from away’. The industry remains strong and vibrant here, with many success stories and several regional clusters to take advantage of. My main bits of advice starting out would be to do a lot of research, speak to those already in the business, prepare your funding source(s) as far in advance as possible and have some kind of windfall or backup plan, just in case. Oh, and make sure you really like to meet new people, hear their stories and spend a good chunk of every day being social. Because that’s pretty much what showing people a good time on PEI is all about.
Colin Dawson, CPA, CA and Manager with MRSB Chartered Accountants, reviews some key steps to ensuring your practice is optimized for future wealth
Doctors, you have a lot on your proverbial plate. Apart from back-to-back appointments, patients and your own family to tend to, you also have a professional practice to manage. It's understandable that your tax, accounting and bookkeeping demands often sit squarely on the back burner. After all, what's more important: what might happen 10 years from now, or what's happening today?
The truth is, while it might be low on your priority list, proper management of your finances needs to start now if you're to ensure a worry-free, prosperous future. There is unfortunately much evidence pointing to physicians and other medical professionals not having the tools required to properly prepare their practice for retirement, or even to ensure wealth in the here and now.
If you want to start taking the necessary steps toward a secure future, here are a few things to think about - and start working on - to make your ideal retirement a reality:
1. Structure your practice for tax purposes and income splitting
If your practice is incorporated, this offers multiple opportunities to reduce your annual tax burden. A few of the ways you can use corporate structure to reduce taxes are to split unincorporated income with your spouse, keep surplus income in the corporation to take advantage of corporate tax rates, and consider an Individual Pension Plan (IPP). The rules are more complex for incorporated practices, but the benefits usually outweigh the costs.
2. Draft an up-to-date Will
The importance of a current Will & Testament can't be overstated. This is the primary document that determines how your assets will be divided between your spouse, children and other family once you're gone. And if you're thinking, 'I drafted my Will years ago, I have nothing to worry about,' then be aware that recent changes to your marital status and other factors can change or even nullify your Will. Drafting your Will when you have full capacity to do so (not when you're sick or under duress), reviewing the document regularly and updating the terms of your Will in line with your estate plan are all crucial steps. You will also want to involve your lawyer and accountant to make sure your finances, assets and any possible tax issues are discussed.
3. Arrange adequate insurance coverage
There are many types of insurance and each professional has different needs, whether you are a dentist or a psychiatrist. Many providers offer customized insurance packages to meet the specific needs of doctors. Accidental death, disability, lawsuits, critical illness and loss or destruction of documents are all considerations to keep in mind as the owner of a professional practice. The chances of most of these events happening are thankfully quite low, but if the worst happens it will affect not just yourself but your entire business.
4. Keep your billings and financial statements up-to-date
While your Will protects you into the future, up-to-date monthly and yearly financial statements help things go smoothly now. They will allow you to monitor your cashflow and financing needs to ensure that you can not only meet your immediate operating expense requirements (e.g. rent, payroll, supplies) but also any significant future property and equipment acquisitions. Timely and accurate financial records allow you to determine what your true disposable income is and provide your staff with needed financial information, which will aid them in performing their everyday duties (e.g. filing appropriate remittances to CRA, ordering medical and office supplies, maintaning patient accounts). And if there is ever a question as to what was paid and when, the records are at your fingertips, or those of your accountant.
For most medical practitioners, the day to day business aspects of your practice will never be as important as seeing and caring for patients - and this is of course the right approach. But with a bit of attention and planning, you can set your practice up to provide the optimum amount of income and security. You will thank yourself when you finally look back at your years of successful practice and realize you helped not just your patients but yourself and your family along the way.
MRSB Group was thrilled to celebrate the official opening of our new Summerside location yesterday. With comments from the Honourable H. Frank Lewis, Lieutenant Governor of PEI and Summerside Mayor Bill Martin presiding over our ribbon-cutting ceremony, it was an evening to remember. Staff, clients and friends stopped by for some wine and food, getting the chance to tour the Summerside office at the same time.
We would like to officially welcome Cora Lee Dunbar and her team of professionals to the MRSB team. Together we look forward to serving a broader region of Prince Edward Island and providing an even greater level of service to our clients.
The Honourable H. Frank Lewis, principal Cora Lee Dunbar, Mayor Bill Martin and partner Lloyd Compton at the Grand Opening
The Lieutenant Governor share a laugh with Cora Lee Dunbar and provides remarks during the ribbon-cutting ceremony
Mayor Bill Martin addresses the crowd, then presides over the ribbon-cutting ceremony
MRSB partner Lloyd Compton says a few words, as staff and guests enjoy the refreshments
Thanks to everyone who stopped by and took part. It was a great way to celebrate, and we look forward to being part of the Summerside business community!