Small Business Owners – Need 3 Plans

Financial Plan > Business Plan > Estate Plan (asset protection; wills; trusts; testamentary trusts; powers of attorney; and during life distributions).

Time Out:

Most small business owners work very long and hard in their businesses. They sacrifice, family time, holidays and social engagements to enable their business to provide them with the best possible return.

In expanding businesses, the sacrifice becomes even greater, with a whole range of additional considerations, from planning to staffing, to negotiating with landlords and suppliers, to engaging lawyers and accountants, to name a few.

But, do small business owners ever take time out to quantify what their business needs to contribute financially to their ability to have an affordable lifestyle and retirement?

Personal Financial Plan*:

First and foremost, the small business owner needs to develop an understanding of living expenses over time, including educating children and the like, not to mention life and loss-of-income insurance costs, and the costs of the prospect of a nursing home or retirement village in later life (“lifestyle expenses.”) This may seem a big task to address, but there are plenty of financial models available from good financial planners, that can give a pretty sound idea of various scenarios, for lifestyle expenses.

Second, a small business owner should then develop an idea of how much money, gained from different sources, he or she will need to fund these lifestyle expenses and an affordable retirement, be they funded directly from the business owners’ own efforts, or government, or a combination.

Business Plan*:

Once a business owner quantifies what his lifestyle costs and retirement needs are likely to be, then he or she can set about quantifying what he or she has to earn, over time, from various sources including the small business, of which they are the owner.

This then gives them context for what their business has to produce, over time, in salaries and dividends and the ultimate sale price, coupled with investment (superannuation and non-superannuation) over time.

The more successful business owners employ these techniques, to give them context for what they have to ‘earn’ from their business and the sacrifices they have to make in achieving that. It also clarifies lifestyle and reduces risk from business failure.

Estate Plan – detailed or basic, you need a will – see your Solicitor:

As with employees or retirees, small business owners should address their estate planning needs early in their life. These needs change and can be cost-effectively revised with your solicitor. If a small business owner client has a personal financial plan and business plan, they should be better able to address their business and estate planning issues with their solicitor in terms of the content of their wills; benefits of self- managed superannuation funds; need for insurances (business and personal); shareholder and partnership agreements; employment contracts; trademark protection; and business operating agreements.

Wilson Haynes provides a 40-minute, cost-free, no-obligation initial meeting to discuss peoples’ estate planning requirements, whether or not they have a personal financial or business plan.

At the very least, like employees or retirees, every small business owner should have a basic will and enduring power of attorney, to enable the business to continue to operate if mental capacity is lost, and to record what is to happen to the business and shares in it, on the business owner’s death.

(*Wilson Haynes has a number of trusted accountants and financial planners to whom we can refer interested small business owners, should they wish to explore options.)

© Wilson Haynes solicitors-conveyancers- business advisers 2018

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