On July 18, 2017 the Canadian federal government proposed significant tax changes for private businesses. Many have written about these changes. The Prime Minister and Minister of Finance are defending the changes. They are ignoring the wide spread collateral damage in favour of political points. Others commentators ignore that some businesses disproportionately benefit from the current tax rules.
I have also written about the changes here. I’m in the camp of those saying that this is a class war. These two bureaucrats who are in the top of the 1%. But, they are telling middle class business owners these changes will not affect them. This is not true? The collateral damage from the changes will be huge!
With that said, what have I learned about planning from these changes?
People try to predict the future, but are wrong as often as they are right. This is why planning for the future is so critical. So, here are four axioms about planning:
The unexpected will happen
No economy st expected the Canadian economy to grow as much in the second quarter as it did. The result was an unexpected interest rate increase. Life on our terrestrial ball is very complex. There are too many variables for us to predict. Accept this and build a realistic plan. Use only as many variables as needed to build a plan that passes the cost versus benefit test. Don’t be afraid to challenge your assumption. But, din’t settle for paralysis by analysis.
Someone will love your plan
This goes without saying. Even terrorists love their life destroying plans. This might be an extreme example, but still a valid caution. Someone (including you) loving your plan, doesn’t mean it’s s a good plan. Assuming you’re not planning world domination, use the positive energy to make your plans a reality.
Someone will hate your plan
The Minister of Finance has proven this. Business owners use legitimate tax laws to plan their lifetime tax burden. He hates that planning so much, he called business owners tax cheats. You might be planning to start a business, but your spouse hates the idea. Or, planning to add new products or services, but your business partner hates the idea. Listen to the feedback. Make any adjustments necessary. If appropriate, move ahead with your plan.
Planning is fluid not static
As evident from the first three points, things change. If the tax changes go through, tax planning for private business owners will change. Your plan should be flexible enough that you can make course correction. If you launched a new product and it’s not gaining traction, be might have to change sales strategy. Or, reduce the price. You might even have to cancel it, like the death of BlackBerry devices.
- Build the financial model of your business plan in purpose built software or Excel. Use a well defined series of variables rather than static values. You can manipulate the variables, making the modeling iterative rather than static.
- Build a tax plan with a professional that is not so complex and costly to unwind, that your are stuck with it. Run a sensitivity analysis on the plan. Ensure that you are informed of all uncertain tax positions.
- Build a strategic plan that is right sized for your business. Involve all key management personnel in the process. This helps you to consider as many outcomes as possible. Document your plan in an electronic format that can be reviewed often. Then, schedule the meetings where you will revisit your plan. Schedule a mini meeting half-year and a full meeting at your year-end. Neither of these should be a rewrite of the plan, but a review of how you performed against your plan.
- Other examples include: an exercise plan, personal goals, a personal or business budget, and more.
Benjamin Franklin said
“failing to plan is planning to fail”
Some fail to plan, because a plan cannot accurately prediction of the future. But, that misses the point. A plan is a prudent tool to set goals and expectations. It’s also a tool to help you react to deviations from your desired outcome.
Are there truths about planning you think I’ve left out?
Tags: Financial Planning, Planning