We regularly hear about RRSPs, TFSAs and RESPs. No, it’s not a series of Scrabble letters; these are three very different savings mechanisms.

How can you make sense of this all? How can you choose what’s right for you? To answer these questions, let’s see what’s behind these letters and look at the main characteristics of each.

RRSP

The most popular, the Registered Retirement Savings Plan (RRSP) is a mechanism put in place by the tax authorities to promote retirement savings. The contributions permitted in this plan are limited by precise tax parameters based on earnings and contributions made to other retirement plans. The RRSP’s primary characteristics are:

• Contributions are deductible from income;
• Income generated in an RRSP is not taxable;
• Amounts withdrawn from an RRSP will be taxed.

TFSA

More recent than the RRSP, the Tax-Free Savings Account (TFSA) has its own set of rules. Contributions are limited to a yearly cumulative ceiling, which is currently $5,500. If you have unused contribution room from previous years (since 2009), it will automatically be carried forward. As such, if you contribute to a TFSA for the first time in 2018, you can contribute up to $57,500 in the plan. The TFSA’s other characteristics are:

• Non-deductible contributions;
• Income generated in a TFSA is not taxable;
• Amounts withdrawn from a TFSA are not taxed.

RESP

Last but not least, the Registered Education Savings Plan (RESP) allows individuals to make contributions to a plan for with the purpose of funding a child’s post-secondary studies. Annual contributions are not limited, but the cumulative ceiling is $50,000. The RESP’s other characteristics include:

• Non-deductible contributions;
• Income generated in an RESP is not taxed;
• Contributions can be reimbursed to the payer with no tax impact;
• Earnings, paid in the form of an education assistance payment, are taxable for the plan’s beneficiary (i.e. the child studying).

Contrary to an RRSP and a TFSA, an RESP gives entitlement to government incentives. In fact, the federal and provincial governments provide a subsidy for each child beneficiary of an RESP, from birth until the year they turn 17. The maximum annual financial aid is $750 per beneficiary, that is, 30% of the first $2,500 in contributions paid yearly. Low- and medium-income families can obtain additional assistance. Each child is entitled to a maximum cumulative of $7,200 for federal purposes and $3,600 for Quebec.

Advice

To get the maximum savings possible, use each of these financial mechanisms wisely based on your saving ability. Since they have their own advantages, you need to examine their objectives properly in order to prioritize the best plan for you.

Don’t hesitate to contact your tax specialist or financial advisor to make the best investment decisions possible.

Financing offers for mergers and acquisitions are highly favourable right now. What steps should you take for a successful process?

There is a lot of capital available in Quebec, so much so that you can negotiate advantageous conditions if you want to acquire another business.

The search for financing must be based on a solid process in order to be carried our smoothly, in the most profitable and least risky way for you. Here are the main steps of the process and our tips for success.

1. Establishing an accurate portrait of your business

Above all, it’s important to have the most complete and accurate view of your business. Make sure you know the sources of its profitability, accurately measure the value of its assets, etc.

2. Assessing the purchase price

The current abundance of capital tends to increase the value of transactions. Various valuation methods can be used to determine the value of a transaction. The best option is to call on a business valuation expert to determine a fair price.

3. Estimating your financial needs and borrowing capacity

You must be prudent and realistic. All lenders evaluate a financing application based on its underlying risk and want to ensure that their clients will be able to meet their commitments in case of unforeseen events.

Therefore, you need to establish different scenarios for your business (for both growth and declines). Our experts will help you develop and validate these scenarios by applying resistance tests to guarantee that you can stay the course in difficult situations.

Make sure you have the necessary funds not only to finance the transaction, but also to support current operations (working capital, capital assets, internal growth projects,
etc.).

Note that there’s an adjustment period after a transaction, during which the business’s performance may not be as strong as planned. So you will need to inject enough oxygen into your capital structure to get through this period.

You also need to think long-term to ensure that you will be able to refinance your debt once it comes to maturity. For example, ask yourself what would happen if your business was not performing well when the time comes to refinance.

Don’t forget that there are two main types of traditional financing for which lenders use different ratios in order to evaluate your borrowing capacity:

• Asset-backed financing, especially used for businesses that have significant inventories and assets, such as distributors. Lenders will take into consideration the value of the assets and the fixed charge coverage ratio (to measure the business’s loan repayment ability once it has assumed its current expenses).
• Cash flow financing, especially used for businesses whose assets are not very high. Usually, two ratios are considered by financial institutions: debt to EBITDA (earnings before interest, tax, depreciation and amortization) and the fixed charges coverage.

This said, lenders may use several other ratios.

4. Soliciting financing

The purchase price, your borrowing capacity and any balance of sale (the portion of the value of the transaction that you will ultimately reimburse to the seller) will determine whether you also need to obtain equity financing from co-investors.

Generally, financial institutions will ask that equity financing represent 35% to 55% of the transaction’s value, entirely injected by yourself or by joining forces with a co-investor.

It is essential to develop a capital structure with an optimal combination of both types of financing that provides you with sufficient leverage for today and in the coming years. However, make sure this leverage is not excessive.

Lastly, we recommend soliciting several lenders and financial partners at the same time to accelerate the process and, the competition will help you negotiate the most advantageous terms and conditions.

Are you thinking about buying a business? Contact our multidisciplinary team. Our experts will guide you every step of the way.

How can I find the employees I need? How can I attract the best talent? Thousands of entrepreneurs like yourself are asking themselves the same questions.

Employers are under pressure because of the labour shortage. There are currently some 11,000 vacancies to be filled in Quebec according to Canadian Federation of Independent Business 2018 second quarter data.

In this context, you need to stand out from other employers and, now more than ever, you need to adopt recruiting best practices. Here are six key tips for a successful process.

1. Work on your employer brand

First, you need to position yourself as an employer of choice and project this image in the community. The more you’re talked about, the more candidate attention you’ll garner.

We suggest having an efficient social media presence. You can post job offers, of course, but remember to publish interesting articles on a regular basis, showcase your successes and the development opportunities you offer, talk about social events you are involved in and the organizations you support, etc.

Here are the main aspects you should pay special attention to:

• Corporate values and culture;
• Work environment—it should be pleasant and energizing;
• Team spirit and approaches to engaging staff;
• Advancement challenges and possibilities;
• Global compensation and other benefits;
• Working conditions (flexible hours, option to work offsite, etc.);
• Support (training, coaching, mentoring, etc.);
• Quality of the management team;
• Work tools;
• Entity’s social involvement.

Your current and former employees are your best ambassadors to promote your employer brand. Make sure you maintain excellent relationships with them (to stay in touch with former employees, hold a “former employee day” each year for example).

We recommend an exit interview with employees who are leaving. This will help you pinpoint areas that may need adjustments. This is also a good opportunity to express your recognition for their work.

2. Be in enticement mode

In the current context, it’s no longer a case of candidates selling themselves, you have to entice them.

How you greet the candidate for the first meeting will be key. The meeting should be more of a discussion than an interview and take place in a relaxed atmosphere. Take the time to talk about the entity, its culture and how it works, so the candidate will feel that you have a dynamic organization.

Today’s candidates are looking for challenges. You have to prove that what you offer is up to their expectations. However, be open and transparent: don’t make promises you can’t keep. If your organization is facing certain challenges, it’s to your benefit to talk about them and how you plan to address them.

3. Be flexible

Don’t consider that all of your selection criteria are set in stone. Instead, consider assessing candidates who stand out for their development potential and ability to integrate well in your organization’s culture.

4. Act quickly

Candidates looking for jobs often have several offers. If you find that a candidate seems promising, make an offer quickly or you run the risk of losing the person to another organization. Generally, make sure your recruiting process is as flexible and fast as possible.

5. Develop resources internally

As an employer of choice, you must have a solid competency development and succession planning program. The ideal candidate to fill a key position may already be working for you!

Most employees are looking for opportunities to progress. You should support them, offer training, coaching and mentoring. Target employees who seem the most apt to be promoted to strategic positions so you can give them the necessary development support.

6. Get help

That said, finding the real gem is no easy task. We recommend that you call on human resource and recruiting specialists, like those at Raymond Chabot Grant Thornton. We offer a full range of human resource services. We can help you position yourself as a particularly appealing employer and find candidates who will fit in perfectly in your organization.