A 45-minute chat could start getting your business working for you instead of the other way around, writes Tom Hamilton of Davy.
In my experience of working with business owners, they spend too much time working for the business and not enough time getting the business to work for them.
Why is that? Often it boils down to sheer workload. As ‘the boss’ you routinely get dragged into a never-ending list of jobs and duties that consume your day.
Hard to see the bigger picture
For many, it has become impossible to see the bigger business/financial picture for the daily tasks. If this rings a bell, consider putting a personal financial plan into place.
A good starting point is to ask yourself a question: What is my definition of personal financial success? For some it is about financial independence, and for others it is about the freedom to be able to make bigger decisions without worrying about money.
The majority of clients I work with simply put it down to the volume of tasks required in running a busy construction company. This can distract them from addressing important business issues like decisions about how and when to exit the business. Challenges can often arise on how to handle this transition phase smoothly.
Get your shareholder cap on
These issues are too complex to add to your weekly to-do list and require careful consideration, expert advice – and a change of mentality. Forget about working for your business and focus on working on your business. Think like a shareholder.
As the owner of the equity in a business, you want to maximise the value of your biggest asset (i.e. the business itself). You may be considering selling the business or passing it on to the next generation.
The objective of a financial plan is to align your options and decisions with these long-term targets and focus on:
1. Lifestyle maintenance
Building up your pension fund is the simplest most effective way of extracting the maximum amount of money from your business in order to maintain your income and lifestyle when you retire. It removes a great deal of risk if the family wealth is tied up in the business.
A tailored financial plan will calculate your pension funding capacity and tax reliefs available.
2. Business structuring
The purpose of a financial review is to ensure the business is structured to deliver maximum value to shareholders, regardless of the lifecycle’s stage your business is at.
There may be an opportunity to move from a single limited trading company to a holding company structure. This move has allowed many owners to ring-fence their assets before selling the business tax free. This is extremely advantageous for businesses with multiple shareholders.
3. Investment strategy
A tailored investment strategy will help you build a portfolio that reflects your individual circumstances while avoiding the common pitfalls of having an over-concentrated investment position.
Taking all factors into account, your financial plan will include an investment strategy aligned to your goals while retaining the flexibility to adapt to any changing circumstances.
How to get the ball rolling?
Flexibility is so important. There is no ‘one-size-fits-all’ solution. Every business is different and unique – just like its owners.
A personal financial plan takes a holistic view of your current financial position, circumstances and goals in order to map out the individual actions and decisions that will help you get where you want to be.
I suggest you take time out from the ‘day job’ and schedule an initial debrief with an experienced financial adviser. It will only take approximately 45 minutes to sketch out the ‘big picture’.
Redressing the balance so that your business works for you can be made easy if you partner with an experienced adviser so get started today.
Tom Hamilton is a Director at Davy Private Clients. He works with construction company owners to provide best-in-class financial planning, investment management and asset selection. You can contact Tom directly on 01 614 8787 or email him at firstname.lastname@example.org.
Please note that this article is general in nature, and does not take account of your financial situation or investment objectives. It is not intended to constitute tax, financial or legal advice and is based on Davy’s understanding of current tax legislation in Ireland. Davy does not provide tax or legal advice. Prior to making any decision which may have tax, legal or other financial implications you should seek independent professional advice. There are risks associated with putting any financial plan or strategy in place. The value of investments may go down as well as up.
Davy Private Clients is a division of J&E Davy. J&E Davy, trading as Davy, is regulated by the Central Bank of Ireland. Davy is a member of Euronext Dublin and the London Stock Exchange. In the UK, Davy is authorised by the Central Bank of Ireland and authorised and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Financial Conduct Authority are available from us on request.