Financial Planning for Business Owners

Connect the success of your business with the life you want to build.

Your business may be your main source of income, your largest asset and an important part of your future retirement. That means the decisions you make through the company can have a direct effect on your personal financial security.

Habitual Wealth helps business owners bring these decisions together. We take the time to understand the business you are building, the people who depend on it and what you ultimately want your success to make possible for you and your family.

From pensions and protection to personal investments, retirement and preparing for a future sale or succession, we can help you create a clear financial plan that develops as your business evolves.

Pension planning can help a business owner build long-term personal wealth outside the company.

Depending on your circumstances, contributions may be made personally or by the business as an employer. Employer pension contributions can sometimes be an effective part of an overall remuneration and retirement strategy. Their tax treatment will depend on the facts, including whether the contribution is allowable for the business, the relevant pension rules and your available allowances.

We can help you consider:

• the pensions you already hold and whether they remain suitable for your objectives
• personal and employer contribution options
• the annual allowance and whether carry forward may be relevant
• how pension contributions interact with salary, dividends and wider remuneration
• the investment strategy within your pension
• the timeframe before you may need to access the money; and
• how pension wealth fits with the business, personal investments and retirement plan.

A company pension contribution should not be viewed only as a way to reduce tax. It must be affordable for the business, appropriate within the wider remuneration package and suitable for your personal objectives. Your accountant should confirm the company tax treatment.

Decide what the business should retain and what your life requires

Business owners may receive value through salary, dividends, pension contributions and other arrangements.

There is no single mix that is right for every owner. The appropriate approach may depend on:

• your household spending
• the company's profitability and cash position
• planned investment in the business
• your pension allowances
• other personal income and
• the objectives you are working towards.

Habitual Wealth does not provide accountancy or tax compliance services. We can work alongside your accountant so decisions about remuneration support your wider financial plan and are based on current tax advice.

Do not let one asset carry your whole future

Concentrating time, capital and energy in a business can be necessary to make it successful. But the same concentration can leave your personal future exposed if the business performs differently from expected or a planned sale is delayed.

Building wealth outside the company may provide greater flexibility before, during and after an exit.

Depending on your circumstances, this might include:

• pensions
• ISAs
• personal investments
• cash reserves
• and other assets. 

We can help you consider:

• how much accessible cash you and the business should retain;
• the balance between reinvesting in the company and building personal assets;
• your timeframe, objectives, attitude to risk and capacity for loss;
• the degree to which your current wealth is concentrated in the business;
• how pensions and investments could support different retirement dates; and whether your personal plan remains viable if the business is sold later or for less than expected.

Diversification can spread risk but cannot remove it. The value of investments can fall as well as rise, and you may get back less than the amount invested.

Please note that these plans do not have a cash-in value and will stop if payments to them cease.

Specialist insurance is only one part of continuity planning

A policy alone does not create a complete continuity plan.

Ownership documents, company agreements, policy structure, trusts, valuation assumptions and the intended use of any proceeds must work together.

We can help assess the financial need and advise on suitable protection within the scope of our services. Legal advice may be required for shareholder agreements, cross-option arrangements, trusts or changes to company documents.

Legal advice and Trusts are not regulated by the Financial Conduct Authority.

Know what the business needs to deliver before you depend on a sale

A business sale can be one of the largest financial events of an owner's life, but the expected headline value does not automatically translate into the lifestyle that follows.

Before relying on a future sale, it is useful to understand:

• the annual spending you want the proceeds and other assets to support;
• how long your wealth may need to last;
• the effect of tax, transaction costs and retained liabilities;
• what happens if the sale is delayed, staged or achieves a lower value;
• whether you want to continue working or consulting;
• how much investment risk you may need or be willing to take; and
• what you want to leave to family or other beneficiaries.

Cashflow modelling can illustrate different assumptions and help you identify the gap between an expected sale and the future you want. It is not a prediction or guarantee, and the eventual value and timing of a business sale remain uncertain.

Give major decisions the time they deserve

After years of holding wealth in a business, receiving a significant capital sum can create a very different set of responsibilities.

You may move from regular company income to relying on cash and investments for the rest of your life.

A considered post-sale plan may include:

• holding an appropriate cash reserve while immediate decisions settle;
• identifying the income and capital you may need over different periods;
• creating an investment strategy aligned with your objectives and capacity for loss;
• using pensions and available tax wrappers where suitable;
• supporting children, grandchildren or charitable causes;
• reviewing protection, estate and Inheritance Tax planning; and maintaining flexibility while your priorities after the business become clearer.

Advice concerning the legal, tax, valuation or transaction elements of a business exit may involve an introduction to services that are separate and distinct from those offered by St. James's Place. Habitual Wealth can focus on the personal financial consequences and coordinate with the relevant professionals.

A successful transition should work for you as well as the next owner

Not every owner plans to sell to an outside buyer.

You may want to:

• pass the company to family
• transfer control to management or
• retain an interest while reducing your day-to-day involvement.

Financial planning can help you explore how the proposed succession affects your own income, retirement and family position.

It may also highlight questions around:

• fairness between family members
• business protection
• future control and
• the eventual transfer of personal wealth.

Succession, company restructuring, trusts, wills and tax advice can be legally and technically complex. We can work with your solicitor, accountant and corporate advisers so the financial plan reflects the structure they recommend.

Look after the workforce that helps create the value

For employers, the value of the company may depend on retaining skilled people and maintaining a stable, motivated workforce. Pension arrangements and employee benefits can form part of that wider strategy. Through our corporate services, we can help you consider workplace pensions, benefits and protection arrangements for directors, shareholders and employees, where these services are within our scope.

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