“Starting your own business isn’t just a job – it’s a way of life.”
Richard Branson
On the one hand, it’s surprising that those who have most to lose often fail to plan, yet on the other it’s almost inevitable that the day to day pressures of running a small business push other tasks to one side. Whatever your experience it makes sense to take stock now and then, as the decisions you make now may have repercussions for many years to come.
For many financial advisers, their first point of interest in your situation will have been your money. Not your future. Not your business. Not what you wanted to achieve out of life. Your money.
We turn that approach on its head. What right do we have to talk about your money before we understand what is important to you, your values, your beliefs, your aspirations and how you see your future and that of those close to you?
74% of family-owned businesses have been in control of the family for only a single generation.
Department for Business, Innovation and Skills (2016)
Of course, some businesses do not want to remain family business, or do not see themselves as family businesses, for those that do, however, why do many seem to fail to achieve that aim?
We think it comes down to approach.
A mindset that joins business and personal aims is different –
In work, you are probably primarily concerned with growing turnover and profit, or at least maintaining it at current high levels. At home, you are likely to be focused on more tangible, personal aims; a house move perhaps, a certain number of family holidays a year, your children’s education, or maybe a major project or hobby you regularly spend money on.
Ultimately, despite their different approaches, you are working towards the same things; a growth of wealth which helps you to achieve whatever it is that you want in life and in business.
Your personal success is tied to your company. Your company’s success is tied to you. An approach which recognises these two facts is vital.
Financial planning for business owners is often family focused.
To take a typical example, consider what would happen if you were to exit your business and leave it in the control of your son or daughter. This is a common wish for many family business owners.
The financial planning for some at this point will revolve around the person exiting the business. You are the person most likely to have taken financial advice and therefore the plan will be from your point of view.
But what of your son or daughter? They may be about to take over your business. Presumably this will involve a significant change in circumstances, both now and further down the line. Have they prepared for this point? Do they have all the skills they will need? Are they and the business financially ready?
This is where many financial plans ultimately fail from a wider ‘top down’ point of view, because family have not been involved. If you are passing your business to someone and their plan runs at odds to your own (or does not exist at all), then why should that transition be a success?
Financial plans, particularly for business owners, work best when the whole family is involved. When everyone can see the wider picture and have a ‘personal’ plan that works towards and for that picture, then everyone’s plan is more successful.
Just 15% of family businesses make it to second generation ownership. Only 1% are kept within the family for four generations.
Department for Business, Innovation and Skills (2016)
At some point, you will not be in charge of your business. This is a fact and so, whether tomorrow or when you are 99, your business will pass out of your hands.
How that happens though, in most cases, can be dictated by you.
It is odd then that in many cases, the transfer of business ownership is treated as almost factual, without substantial personal planning.
Some family businesses are aware that they will need to sell and the business will pass out of the family’s hands at some point. Other family businesses know which family member will take over when the current owner retires. And yet, in either case, there is rarely a documented sales plan or development plan to get the incoming family member to a point where they can run the business.
Exiting a business is one of the most important steps you will take as an owner of a family business and yet, too often, there is just a hazy idea for business owners that they will ‘get out at some point in the future’.
The problem is that the future always seems to arrive too soon or too late. You face the prospect of an unexpected event influencing how and when you exit your business, or staying within the business for longer than you want to, a situation which ultimately impacts heavily on what your retirement looks like.
Financial plans for business owners should consider the desired business exit. What will it look like, when will it occur, what financial impact will it have, what work needs to happen in the meantime to ensure that situation comes to pass exactly as planned?
Think about leaving your current position tomorrow and what impact that would have on the goals you have for yourself and your family. In all likelihood, the impact would be significant. Which is why planning for succession and/or exit is so important.
Take our free 5-minute Return On Life online assessment and see what your ROL is.
Information is the key to wise decisions. The Otus Information Hub is packed with articles, videos and case studies to guide you in making smart choices about your financial future.
If you like what you’ve seen so far, please get in touch to ask any further questions you may have.
We work with company directors, senior executives, professionals, people who’ve come into money and people planning for, or enjoying, retirement. To us, it’s not your personal circumstances that matter most; it is the fit between our values and yours, because that is what shapes your relationship with us.
About you
Otus Financial Planning exists to help people like you get their ‘financial house’ in order – and keep it there!
About us
We work with company directors, senior executives, professionals, people who’ve come into money and people planning for, or enjoying, retirement. To us, it’s not your personal circumstances that matter most; it is the fit between our values and yours, because that is what shapes your relationship with us.
About you
