september 2014 BCBusiness 27 pete ryan
intel
L
aunching a business is a risky
financial venture, but it doesn't
have to be all or nothing. Paul
Savage, a chartered financial
analyst and certified business
intermediary with Pacific Business
Brokers Inc., and John Nicola,
CEO of
Nicola Wealth Management Ltd., share
some tips for small business owners
struggling to find their way financially.
Diversifying Your Investments
As the old adage goes, don't put all
your eggs in one basket. Business
owners are often tempted to eschew
lower-risk investments with mediocre
returns, instead investing more in their
business where they control the risk
and reap higher payoffs, says Savage.
However, he cautions that businesses
are inherently unpredictable. "Even
large, well-established businesses have
very tough times."
Splitting your investments among a
combination of assets outside of your
company—real estate and financial
assets such as tax-free savings accounts,
bonds and mutual funds—protects you
from having one unexpected blow put
you in financial hardship.
"Other investments need to
complement, not compete with, the
returns on the business," says Nicola.
"Don't compare the returns to your
business returns. They should be
relatively liquid."
As soon as your business provides
cash flow back to you, look for outside
investments. For a young business
person, Nicola recommends "some
combination of a tax-free savings
account and a corporate investment
account."
The Power of Incorporation
Savage advocates for incorporating
your business early on in its life
cycle for "the benefits of additional
credibility and reduction of personal
liability." Separating your personal
and business life puts you at less
financial risk and offers tax incentives.
"If you're incorporated, it's easier to
get financing," explains Savage.
Nicola agrees that incorporating
early has its benefits, and advises to
wait until the business has annual
profits of between $70,000 and
$100,000. "Incorporating gives you
the benefit of only paying 13.5 per cent
tax on the profits," he says. "When
you need to reinvest money in the
I t ' s y o u r
b u s I n e s s
The
Numbers
Game
How to get your small
business—and yourself—
on safe financial footing
by Kristen Hilderman
f i n a n c e
09/14
y
2 8 v i s u a l l e a r n i n g
3 1 a s i a
3 3 c a l e n d a r
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