Being in business is a bit like managing a racing team. You need to be able to count on good mechanics, a skilled driver, a qualified technical director… and solid financial partners. Without these key elements, the chances of success are greatly reduced.
Running a business is the same: you need the right resources, the right tools, and a clear strategy to perform well.
The daily life of an entrepreneur
- The development strategy
- Finances
- Technology and equipment
- Marketing
- Human resources
- Operations and sales
Just as a Formula 1 car must stop at the pits to continue the race, a company also needs strategic breaks and adjustments in its daily routine.
And in most cases, the main obstacleis the finances. When money runs out, everything else can slow down. That’s why financial management must remain at the top of your priorities.
We often think about the financing or acquisitions needed for growth. But we sometimes forget that there is several important steps to take in an entrepreneurial journey.
The three major financial phases to go through in business
- Growing your capital
- Protecting your capital
- The transfer of your estate and the optimization of your wealth
1. Capital growth
This is the first step. At this point, you are probably essential to your business… and perhaps even to your family’s well-being. Can you afford to put their financial security at risk?
People often underestimate their needs, thinking that everything can be sorted out with a little accounting or legal advice. However, your brainpower is your most valuable asset—and incapacity can strike quickly.
In Canada, 1 in 3 people will survive a major health issue… but won’t be able to work for an average of nearly three years.. Would your family be able to manage without your income during that time? What about your business?
What if your partner became unable to work… or passed away? What does your shareholder agreement say? Would you be able to buy back their shares? If not, would you have to engage in costly legal proceedings to settle a dispute that was anticipated from the outset?
2. The period of growth and prosperity
Over time, your business takes off. You make profits, you gain stability, you have cash to invest… and you may be considering setting up a management company.
Well done, that’s an excellent sign!
Perhaps you are already investing, either on your own or with an advisor. But have you taken the time to consult your strategic team? To benefit from a real plan?
Because unless you are a specialist yourself, it is normal not to be familiar with all the intricacies of taxation. Otherwise, you would be working in a different field!
Like a tire that leaks without you noticing, certain details can affect your overall performance. The same goes for your tax return: are you living with money gross… or net?
Remember that a shareholder does not directly own the company’s money—they own shares. If, after analysis, you discover that your current investments are more risky and less profitable than they should be… would you continue in this direction?
Probably not. That’s often what my clients tell me after our first assessment meeting.
3. Protection and transfer of your assets
It is common to believe that unpleasant surprises only happen to other people. However, few people have never experienced a person who has experienced cancer, a stroke, or a heart attack.
Have you considered the impact that a significant loss of income would have on your quality of life… or that of your loved ones?
Many homeowners do not have adequate protection, even though good insurance can be very affordable.
And if you have a management company with significant cash reserves, it may be wise to consider how to withdraw this money efficiently, with minimal tax impact.
Just as you take the time to check your tire pressure or change your vehicle’s oil, you need to make sure your financial planning is running smoothly.. Managing your investments and financial statements is essential, but it’s not enough: you need to a clear plan, aligned with your objectives.
And after?
We arrive at the final stage of any journey: retirement… then succession.
There are two certainties in life: taxes and death.
Congratulations: you worked hard, and you succeeded. You may now be enjoying a well-deserved retirement. And at this point, a new question arises: What will become of everything you have built?
Would you like to pass on your wealth to your children? To a cause that is close to your heart? Or leave a large portion to the government?
This question deserves consideration. A a careful estate planning allows you to ensure that your lifetime efforts will benefit those you love, in accordance with your values—while optimizing the tax aspects.
I won’t say any more…
Over the years, I have had the opportunity to support several “pilots” in managing their entrepreneurial journey. Each journey is unique, but one thing always remains the same: with a good team, a clear vision, and a well-honed strategy, it is possible to go much further… without burning out.
Pascal Dion
Groupe Financier Strateginc
