Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.
With the freedom you get from running your own business comes the responsibility for generating your own income and building your enterprise into something you can retire on.
We talked to CERTIFIED FINANCIAL PLANNER® professional Steven Monaco, Associate Director at Hood Sweeney, about how financial advice can help you look forward to a better future for you and your business.
Why is good financial advice particularly important when you run your own business?
If you don’t have a salary to rely on, keeping your financial affairs in order is even more important. You don’t have the security of paid sick leave or other benefits employees might enjoy when their circumstances change and they need to take time off work. Many business owners, especially when they’re getting started, find themselves putting a lot of money and time into running their company. Having a planner to take care of financial details can ensure you have enough cash flow to meet your personal living expenses and free you up to focus on making the business work.
When you’re new to running a business, how can a planner help you get off to strong start?
For a business in it’s infancy, it’s usually about working in partnership with other professionals, such as your accountant, your solicitor and possibly your bank manager. Your planner acts as an extra pillar to protect your financial interests and support you and your business. The sooner they become involved, the more you’ll benefit from their insights and support as the business, and your personal goals, evolve. It can make the transition from start-up, to successful business, and eventually into retirement, much easier.
When there are multiple owners involved, it’s really important to think about succession planning, even when the business is still getting established. The financial impact of a change in ownership or the death or injury of key personnel can be really significant. By getting the owners together and talking about what would need to happen if one of them decides to move on or was unable to work, we can come up with the right business structure and insurances to protect the business and its value.
How can financial advice continue to add value as your business grows?
As your business grows, usually profits are growing too, along with the number of employees you have. Sometimes this means the structures for business succession and your insurance cover will need to be reviewed and changed accordingly.
With more profit comes the opportunity to look at wealth creation. In the early years, it’s often necessary to keep channelling revenue back into the business for growth. But the time may come when you can start looking at ways to invest profits elsewhere to grow your personal wealth. Following advice from a financial planner, you can determine the most effective way to balance investment risk and return, depending on your life stage and personal goals.
As a business owner, what are the things you need to consider when you’re planning to retire?
As many owners don’t accumulate super savings through salary payments, the business itself is often the retirement plan. And with the superannuation changes coming through on 1 July 2017, it’s now even more important for business owners to start planning for retirement early. In the past you might have waited until you’re almost ready to retire before making several large super contributions before retirement. But there are new, lower caps on making these lump sum payments into your super, so you need to plan your approach to retirement savings as a marathon rather than a sprint.
A financial planner working with your accountant can look at ways of transferring wealth from your business into your super gradually over a number of years. This allows you to maximise the tax benefits of saving and investing through your super without compromising the value, stability and future of your business.
No matter what stage your business has reached, a CFP® professional can offer valuable advice on planning for a secure financial future, for yourself, your loved ones and your business.
Steven Monaco, AFSL – Hood Sweeney 220897, Authorised Representative Number 339526
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