9/15/2021

Take the guesswork out of your retirement

Mike Jaczko and Max Beairsto

Whether we acknowledge it or not, we all have a nagging little voice in the back of our heads that goes around and around wondering whether we currently have enough money to retire and if so, can we continue to enjoy the lifestyle we have come to expect?

Sound eerily familiar?

Further complicating matters is the worry about the effect of increased government intervention on pharmacy operational profits at both the provincial and federal levels. Your little voice is asking: “Do I sell my store now or do I wait?”

The answer lies in engaging and completing a comprehensive strategic wealth plan. Completing a strategic wealth plan involves a sequential process beginning with the collection and collation of ALL of your family assets. Your assets must all be taken into consideration when assembling your estate, namely both personal and corporate assets, registered and non-registered (i.e. RRSPs, TFSAs), real (real estate) and of course your financial assets.

Strategic Wealth Plan Inputs

Generally, the most important family asset most pharmacy owners possess is the family business. Attaining an accurate valuation of your pharmacy business plays a crucial role when preparing your strategic wealth plan. Placing a value on your pharmacy has become a specialized art in and of itself.

Identifying the unique nuances associated with Canadian retail pharmacy “normalized” cash flow has become the “secret sauce” to attaining maximum value for your store. Most accountants and valuators are less equipped to recognize and add these unique attributes for the benefit of pharmacy owners. We have referred to this in past articles as the “normalization” process, which we stress is becoming increasingly complex, reconciling changing factors such as the way pan-Canadian price adjustments play havoc with your store's income statement.

The second important bucket of information requiring collection relates to mapping out your family income, whether it be employment (T4) income or dividend (T5) income attributed from your business or personally held investments. This information can be readily collected and validated by referring to Schedules 4 or 7 of your income tax returns. More importantly, utilizing this information for developing income projections subsequently is an important process that engages an owner in contemplating different scenarios in terms of timelines into the future. Working through this process with your life partner is just as important as attaining the report itself!

The last step in developing a strategic wealth plan involves collecting information pertaining to your expenses, like the costs of living and identifying significant aperiodic expenses such as funding post-secondary expenses for your children, major capital expenses like home renovations, car replacements or purchasing a family vacation property. Furthermore, a good financial planner who understands your business will identify expenses buried in your corporate profit and loss statement that will eventually migrate from your corporate expense list onto your personal expense list. A sample expense list can be attained by clicking on the following link here.

The results and benefits are numerous, not the least of which you will be able to answer the original question posed by that little voice in your head. This process will also serve as a valuable template for your investment manager with which to build an appropriate investment asset class allocation mix. For your peace of mind, start today!