What Is A Corporate Financial Plan?
Sometimes in order to understand what something is, it helps to define what it’s not.
A Corporate Financial Plan is not a Budget, Balance Sheet, Cashflow Analysis, Investment Plan or Life Insurance. Those things can form part of a plan, but they are not a plan on their own.
A Corporate Financial Plan is a living document that grows and evolves with you as your needs change. Like a road map, it answers the questions; “Where are we now?” “Where do we want to go?” and “How are we going to get there?”
Every goal worth achieving deserves a plan. Financial goals are no different. Everyone with a goal, needs a plan.
Canadian Corporations with a Financial Plan are 60% more likely to say they are prepared for emergencies and 73% are more likely to feel that their families and employees are taken care of.
Every Corporate Financial Plan starts with the same three basic questions.
Do You Have Any Debt?
This includes, Credit Cards, Vehicle Loans, Operating Lines of Credit and Mortgages.
If I could show you a way to reduce the interest paid on all your debts, and free up cash flow would that be a conversation worth having?
There are many ways to tackle debt. You could simply sell some unproductive assets, launch a debt snowball, refinance your mortgage, or issue preferred shares.
The key is to do something. Every dollar of principle paid on a debt attracting 18% interest is $1.18 in extra investable cash. No other action you can take has a more immediate impact on the bottom line than debt repayment.
Do You Have A Plan to Protect and Reward Your Team?
Aside from physical property the most important assets of your company are your people.
If I could show you a way to protect your team from illness, injury or other unexpected losses without sacrificing growth or incurring an unmanageable expense would that be a conversation worth having?
Financial concerns arising from medical issues are among the greatest drains on the mental health of employees. In turn those drains on mental health are the greatest threat to their on the job productivity. Nothing says I care about you more than a well-appointed Group Health, Disability or Retirement Plan. It helps take away all kinds of personal stress and keeps your best, most loyal people on the job and working at their peak.
In addition, extra coverage for owners, and managers can protect both the business and individuals from financial losses and uncertainty should a key person need to take an extended period off.
Ask yourself, “What would happen to me, my family and my business if I or a key employee suddenly couldn’t show up to work tomorrow?”
Do You Have A Plan to One Day Exit the Business?
Selling a business or transferring ownership to family can be an extremely time consuming and costly process.
Taxes alone can seriously reduce the value that you can take out for personal needs in retirement. Couple that with the possibility that you might need to sell the business quickly, at a less than opportune time, and the need for an exit plan becomes apparent.
If I could show you a way to transfer the cash in the business to a personal asset without incurring a significant amount of tax, fund retirement and create a tax efficient estate, would that be a conversation worth having?
Regardless of your size and structure now and even if retirement seems like a long way off, there will eventually come a day when you just can’t work anymore. Standard retirement planning tools like RRSPs and Individual Pension Plans might work for now but they might not be enough to sustain your lifestyle in the future.
The effective use of corporate owned Life Insurance policies, Segregated Funds, Holding Companies and Family Trusts are all important considerations when it comes to exiting the business.