If you run your own business, there’s a good chance you’ve never been busier. And trying to navigate the choppy waters of the pandemic might well have been tough for all sorts of reasons.
Perhaps you’ve had to furlough staff and keep a tight rein on costs as restrictions took their toll? Or maybe you’ve been exceptionally busy, supplying products or services in high demand?
Whatever the reasons, it might often be the case that you never end up with the time to deal with your own personal finances. It’s so easy to get caught up in the day-to-day running of an SME that you neglect to look after issues closer to home – your focus might be on ensuring your staff are paid or that your business is well placed when restrictions finally ease.
In the last couple of months, we’ve seen a growing number of business owners approach us because they want to get a handle on their own finances. The last year has encouraged many entrepreneurs to think long and hard about both their current life and their future – what they want from life now and in years to come.
Financial planning can be transformative when it comes to making decisions as a business owner. Here’s why.
What is your business for?
Why did you set up your business?
It might seem like an obvious question, but we find going back to basics can sometimes help business owners to focus on what is important to them. Fighting fires on a daily basis, dealing with orders, deliveries, clients, employees, and keeping the lights on can take up all your time and energy.
However, we’ve seen that the pandemic has encouraged many SME owners to reassess their priorities and realise that they need some sort of “plan” for their own life.
Ultimately, business owners spend their working lives worrying about today and the future. Unless you are a business owner you don’t know how it feels to be responsible for someone else’s income and their ability to pay the bills. Your mind is constantly buzzing about all the different things that make a business work.
However, unless you have a great accountant or business coach, you probably don’t have any sort of idea about what the end game might be for your business. You might be thinking about selling the business in the future, a management buyout, or just to wind the business up.
One of the issues is that these are likely to be vague ideas. It’s unlikely that you have invested time and money in having a clear direction – and an actual plan.
You probably have a business plan, so why not a personal one?
It’s ironic that many business owners spend time and effort creating detailed and measurable plans for their business but not themselves.
You probably have a three- or five-year plan for growth, revenue, and profit. You probably review this plan regularly, measuring your performance against the plan and making changes and adaptations as the business demands.
But have you done the same for you?
Every business owner knows the importance of a clear and concise business plan. So, why doesn’t every business owner have a personal financial plan?
Putting a personal financial in place has many benefits:
It can give you clarity about what your future could look like.
It can help you make sense of your current finances and identify gaps where you might need to do more. For example, you may not have enough protection for your family, or you might not be contributing enough to your pension.
It can force you to think more clearly about what your life goals are, and what you might want to achieve in the future.
It can provide targets to work towards and focus your mind on the eventual outcomes.
Having clarity about your life goals, and the outcomes you want to work towards, helps you to think about how hard you need to push now (or not!). It can help you to consider various scenarios and look objectively at a range of possible situations. Putting plans in place also means you don’t have to place all of your chips on black or red (i.e. a capital event in the future).
Going through a process of REAL lifestyle financial planning with your spouse or partner forces you to answer important questions including:
What really matters to you and your family?
Why did you start the business in the first place? What was it for?
Is your current business working for you? Are you getting what you need out of it?
Are you enjoying your life now?
What do you want to do in the future?
Answering these questions and creating a long-term plan for your future can give you the confidence to make decisions about not just your business, but your life.
For example, what if going through this process meant that you’d know for sure that you would have “enough” to live the lifestyle you want for the rest of life if you sold your business now?
Start the planning process
We meet a lot of business owners who come to us to make sense of their existing finances. You might have pensions, life insurance, or investments that you’ve accumulated over the years, but no real idea why you have these things, or what they are for.
They might not be connected to anything other than a tax saving or because you were told you had to take them out – for example, when you bought your home.
Our job is to help you establish why you have these things, whether they are still appropriate, and how they contribute to the wider plans you have for your life.
By making a long-term plan, we can help you establish what you want to achieve in life, and how your business can help you to get there.
To find out more about how we can help bring clarity to your business and personal finances, please get in touch. Email team@tfp-fp.com or call us on 01621 851563.
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