Time To Recruit Talent

September 16 2009 - Now is the time to consider upgrading talent and making acquisitions according to a new report from RBC. Businesses can benefit from job market conditions to upgrade their talent and, for smaller companies, recruit new employees who may be the key succession planning. A recent RBC white paper urges business owners to consider future leadership in their recruiting and to look at acquisitions while valuations are still low.

Anthony Maiorino, vice-president, High-Net-Worth Strategies & Services, RBC Wealth Management said:

"There is an upside to the current employment market, both for business owners and prospective employees. A large number of business owners will soon want to retire and a higher-than-usual number of talented employees are looking for work. This offers an unprecedented opportunity for business owners to recruit top talent who can potentially take over their business and enable them to retire. This could also be a great opportunity for people who would like to have an ownership stake in a business in five to 10 years."

An RBC study found that one in 4 small and medium-sized business owners aged over 50 plan to exit their businesses within the next five years, but 77% of owners have made little or no progress with succession plans.

The RBC white paper - From downturn to upside: New thinking on business succession for today's economy - argues that increasing a company's internal talent pool not only presents the owner with the option to sell part or all of the business to employees and management, it may also increase the company's valuation if it is sold to a third party. It also suggests that, at this time, acquisitions rather than sales can be a good strategy as valuations are relatively low in comparison with a few years ago. A good value acquisition now could fuel growth and attract an improved valuation when the economy recovers.

Nadia Ceciliot, national manager, Commercial Financial Services, RBC Royal Bank, said:

"Strategic acquisitions can position you to be first out of the gate when the economy fully recovers. You still need to use a disciplined approach and perform thorough due diligence, but you could find your options are more affordable now than they have been in a while - and that might not last much longer."

RBC's Tips for Business Owners Who are Preparing to Retire:

  1. Take advantage of the downturn to upgrade your talent. A stronger and deeper talent pool makes the business more attractive to buyers and may also present the option of selling all or a portion of the company to employees or management.
  2. Consider acquisitions. Take advantage of lower valuations in the current market to fuel growth and make your business more valuable down the road.
  3. Examine your exit options. Normally the main options include passing the business to family, selling to a partner or group of employees, or selling to a third-party buyer. Building a successful succession plan requires professional advice and the execution can take from three to five years. Evaluating options well in advance can help reduce the risk of unpleasant surprises.
  4. Start tax planning early. Whether you are selling the business or passing it on to your children, there can be a significant tax bill. Strategies to reduce taxes and in some cases achieve income splitting could include an estate freeze, the use of a holding company or a family trust, an individual pension plan (IPP), a retirement compensation arrangement (RCA) and life insurance. Some of these strategies need to be in place several years before a sale or ownership transfer to ensure the maximum tax savings.
  5. Involve your family. Find out if your children or their spouses have any interest in working in your business. If they aren't involved but want to be, this could be a good time to bring them in. If they don't want to be involved as employees, you will need to consider other exit options.